AmpliTech Group, Inc S-1, filed Dec 10, 2020
AmpliTech Group, Inc. (AMPG)
As filed with the Securities and Exchange Commission on December 10, 2020
Registration No. ____________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
| AmpliTech Group, Inc. |
| (Exact name of registrant as specified in its charter) |
| Nevada |
| 3669 |
| 27-4566352 |
| (State or other jurisdiction of incorporation or organization) |
| (Primary Standard Industrial Classification Code Number) |
| (I.R.S. Employer Identification Number) |
AmpliTech Group, Inc.
620 Johnson Avenue
Bohemia, NY 11716
(631) 521-7831
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Fawad Maqbool
President and Chief Executive Officer
AmpliTech Group, Inc.
620 Johnson Avenue
Bohemia, NY 11716
(631) 521-7831
(Name, address, including zip code, and telephone number, including area code, of agent for service)
With copies to:
| Gregory Sichenzia, Esq. |
| Alexander R. McClean, Esq. Harter Secrest & Emery LLP 1600 Bausch & Lomb Place Rochester, NY 14604 Tel.: (585) 232-6500 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement is declared effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
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| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
| Title of Each Class of Securities to be Registered (1) |
| Proposed Maximum Aggregate Offering Price |
|
| Amount of Registration Fee |
| ||
| Units consisting of shares of Common Stock, par value $0.001 per share, and Warrants to purchase shares of Common Stock, par value $0.001 per share (2) |
| $ | 9,200,000 |
|
| $ | 1,003.72 |
|
| Common Stock included as part of the Units |
|
| — |
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|
| — |
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| Warrants to purchase shares of Common Stock included as part of the Units (3) |
|
| — |
|
|
| — |
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| Shares of Common Stock issuable upon exercise of the Warrants (4)(5) |
| $ | 9,200,000 |
|
| $ | 1,003.72 |
|
| Underwriter’s Warrants (6) |
|
| — |
|
|
| — |
|
| Shares of Common Stock issuable upon exercise of the underwriter’s Warrants (7) |
| $ | 528,000 |
|
| $ | 57.60 |
|
| Total |
| $ | 18,928,000 |
|
| $ | 2,065.04 |
|
| (1) | In the event of a stock split, stock dividend, or similar transaction involving our common stock, the number of shares registered shall automatically be increased to cover the additional shares of common stock issuable pursuant to Rule 416 under the Securities Act. |
| (2) | Includes stock and/or warrants that may be issued upon exercise of a 45-day option granted to the underwriter to cover over-allotments, if any. |
| (3) | In accordance with Rule 457(i) under the Securities Act, because the shares of the Registrant’s common stock underlying the warrants are registered hereby, no separate registration fee is required with respect to the warrants registered hereby. |
| (4) | There will be issued warrants to purchase one share of common stock for every one share of common stock offered. The warrants are exercisable at a per share price of 100% of the common stock public offering price. |
| (5) | Includes shares of common stock which may be issued upon exercise of additional warrants which may be issued upon exercise of 45-day option granted to the underwriter to cover over-allotments, if any. |
| (6) | No additional registration fee is payable pursuant to Rule 457(g) under the Securities Act. |
| (7) | The underwriter’s warrants are exercisable into a number of shares of common stock equal to 6% of the number of shares of common stock sold in this offering, excluding upon exercise the option to purchase additional securities, at an exercise price equal to 110% of the public offering price per share. |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and the Company is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION, DATED DECEMBER 10, 2020 |
Units
Each Unit Consisting of
One Share of Common Stock and
One Warrant to Purchase One Share of Common Stock
AMPLITECH GROUP, INC.
______________________________________________
This is a firm commitment underwritten public offering of units (the “Units”), based on an assumed initial offering price of $ per Unit, the mid-point of the anticipated price range of the Units, of AmpliTech Group, Inc., a Nevada corporation (the “Company”, “we”, “us”, “our”). We anticipate a public offering price between $ and $ per Unit. Each Unit consists of one share of common stock, $0.001 par value per share, and one warrant (each, a “Warrant” and collectively, the “Warrants”) to purchase one share of common stock at an exercise price of $ per share, constituting 100% of the price of each Unit sold in this offering based on an assumed initial offering price of $ per Unit, the mid-point of the anticipated price range. The Units have no stand-alone rights and will not be certificated or issued as stand-alone securities. The shares of common stock and the Warrants comprising the Units are immediately separable and will be issued separately in this offering. Each Warrant offered hereby is immediately exercisable on the date of issuance and will expire five years from the date of issuance.
Our common stock is presently traded on the over-the-counter market and quoted on the OTCQB market under the symbol “AMPG.” On December 10, 2020, the last reported sale price of our common stock was $0.23 per share. We intend to apply to list our common stock and warrants on the Nasdaq Capital Market under the symbols “AMPG” and “AMPGW,” respectively. No assurance can be given that our application will be approved or that the trading prices of our common stock on the OTCQB market will be indicative of the prices of our common stock if our common stock were traded on the Nasdaq Capital Market.
The offering price of the Units will be determined between the underwriter and us at the time of pricing, considering our historical performance and capital structure, prevailing market conditions, and overall assessment of our business, and may be at a discount to the current market price. Therefore, the recent market price used throughout this prospectus may not be indicative of the actual public offering price for our common stock and the warrants.
On December 7, 2020, our shareholders approved a reverse split of our outstanding shares of common stock by a ratio within the range of 20-to-1 to 200-to-1, to be effective at the ratio and date to be determined by our Board of Directors. The share and per share information in this prospectus do not reflect such reverse stock split.
Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page [___] of this prospectus. You should carefully consider these risk factors, as well as the information contained in this prospectus, before you invest.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
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| Per Unit |
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| Total |
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| Offering price |
| $ |
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| $ | - |
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| Underwriting discount and commissions (1) |
| $ | - |
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| $ |
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| Proceeds to us before offering expenses (2) |
| $ | - |
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| $ | - |
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| (1) | We have also agreed to issue warrants to purchase shares of our common stock to the underwriter and to reimburse the underwriter for certain expenses. See “Underwriting” for additional information regarding total underwriter compensation. In addition to the underwriter compensation, we are obligated to issue 1,000,000 restricted shares of common stock to [an affiliate of the underwriter] at the closing of this offering for services unrelated to this offering. See “Underwriting – Other” for more information. |
| (2) | The amount of offering proceeds to us presented in this table does not give effect to any exercise of the: (i) over-allotment option (if any) we have granted to the underwriter as described below and (ii) warrants being issued to the underwriter in this offering. |
We have granted a 45-day option to the underwriter, exercisable one or more times in whole or in part, to purchase up to an additional shares of common stock and/or additional warrants at a price from us in any combination thereof at the public offering price per share of common stock and per warrant, respectively, less, in each case, the underwriting discounts payable by us, in any combination solely to cover over-allotments, if any.
The underwriter expects to deliver the securities against payment to the investors in this offering on or about , 2020.
| Sole Book-Running Manager |
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| Maxim Group LLC |
The date of this prospectus is , 2020.
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| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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| i |
You should rely only on information contained in this prospectus. We have not, and the underwriter has not, authorized anyone to provide you with additional information or information different from that contained in this prospectus. Neither the delivery of this prospectus nor the sale of our securities means that the information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy our securities in any circumstances under which the offer or solicitation is unlawful or in any state or other jurisdiction where the offer is not permitted.
For investors outside the United States: Neither we nor the underwriter have taken any action that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the securities covered hereby and the distribution of this prospectus outside of the United States.
The information in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since those dates.
No person is authorized in connection with this prospectus to give any information or to make any representations about us, the securities offered hereby or any matter discussed in this prospectus, other than the information and representations contained in this prospectus. If any other information or representation is given or made, such information or representation may not be relied upon as having been authorized by us.
Neither we nor the underwriter have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourself about, and to observe any restrictions relating to, this offering and the distribution of this prospectus.
| ii |
| Table of Contents |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus 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 that may impact our business, financial condition or results of operations. Accordingly, the forward-looking statements in this prospectus should not be regarded as representations that the results or conditions described in such statements will occur 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 prospectus and include information concerning possible or projected future results of our operations, including statements about potential acquisition or merger targets, strategies or plans; business strategies; prospects; 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 a variety of factors and risks, including, but not limited to, those set forth under “Risk Factors.”
Many of those risks and 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 this prospectus. All subsequent written and oral forward-looking statements concerning other matters addressed in this prospectus 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 prospectus.
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.
| iii |
| Table of Contents |
|
This summary highlights certain information appearing elsewhere in this prospectus. Because this is only a summary, it does not contain all of the information you should consider before investing in our securities and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information included elsewhere in this prospectus. Before you make an investment decision, you should read this entire prospectus carefully, including the risks of investing in our securities discussed under the section of this prospectus entitled “Risk Factors” and similar headings. You should also carefully read our financial statements, and the exhibits to the registration statement of which this prospectus is a part.
Business Overview
AmpliTech Group, Inc. together with its subsidiary, Amplitech, Inc., a New York corporation “AmpliTech” or the “Company”), designs, engineers and assembles micro-wave component-based amplifiers that meet individual customer specifications. Our products consist of radio frequency (“RF”) amplifiers and related subsystems, operating at multiple frequencies from 50kHz to 44GHz, including low noise amplifiers, medium power amplifiers, cryogenic amplifiers, and custom assembly designs for the aerospace, governmental, defense and commercial satellite markets. We also offer non-recurring engineering services on a project-by-project basis, for a predetermined fixed contractual amount, or on a time plus material basis.
Our existing product line includes the 18 to 40 GHz wide band low noise amplifier. It is designed mainly for wideband telecommunications such as military and space applications, point to point radios as well as test equipment.
AmpliTech has also introduced a new line of cryogenic amplifiers 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.
In connection with the acquisition of the Specialty Microwave business, we began designing and manufacturing passive microwave components and related subsystems for use in satellite communication ground networks that meet individual customer specifications for both domestic and international customers.
Our Products
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 down 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 |
| Table of Contents |
| 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 by integrators and manufacturers of various communication systems such as cellular base stations, simulators, and point to point wireless radios.
Waveguide to Coaxial Adapters
These adapters are used for all Satcom and Satellite internet gateway systems from S band to K band, or 2 GHz to 50 GHz.
Cryogenic Amplifiers
Designed to operate at 4k temperatures with industry low noise figures from 2-26 GHz range. With a low power dissipation of less than 10 mWatts these cryogenic amplifiers can be used in applications for quantum computing, nanophysics, astronomy, superconductor research and 5G networks.
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.
Our Customers
We serve a diverse customer base located primarily in the United States, Europe, and Asia, in the aerospace, governmental defense, commercial satellite, and wireless industries. Our customers include Viasat, L3 Harris Technologies, Raytheon and Mercury Systems. As of December 31, 2019 and September 30, 2020, there were no customers that accounted for more than 10% of our total revenue. We have both direct and indirect relationships with these customers domestically and abroad via exclusive and non-exclusive sales representatives and various distributors.
Acquisition of Certain Assets of Specialty Microwave Corporation
On September 12, 2019, we acquired substantially all of the operating assets of Specialty Microwave Corporation (“SMW”), a privately held company based in Ronkonkoma, NY engaged in the design and manufacture of custom passive microwave components and related subsystems for both domestic and international customers for use in satellite communication ground networks.
Our mission is to patent certain of our proprietary intellectual property that are used in small volume niche markets and expand our capabilities through strategic partnerships, joint ventures, and mergers and 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 to fulfill our mission to become 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 has focused its research and development (“R&D”) efforts on expanding its product line of low noise amplifiers to include its new 5G and wireless infrastructure products. The Company believes it has made significant progress, introducing new products that will be manufactured as a result of our acquisition of the business of SMW. We expect the combined engineering and manufacturing resources to complement our new product development of subsystems for satellite, wireless, and 5G infrastructures, as well as for advanced military and commercial markets. |
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| Table of Contents |
| Recent Developments
The COVID-19 pandemic has caused significant worldwide disruption throughout the course of 2020 and resulted in the imposition of various public and private sector measures to try to contain the virus, on a local, state, national and international level, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns. These measures have temporarily impacted our workforce and operations and some of the operations of our customers, and vendors, suppliers, and partners. The ultimate impact and efficacy of government measures and potential future measures is currently unknown.
There is uncertainty regarding the business impacts from such measures and potential future measures. While we have been able to continue our operations through a combination of work-from-home and social distancing policies implemented to protect employees, these measures have resulted in reduced workforce availability. Accordingly, we resumed operations on May 5, 2020, with the CDC safeguard guidelines in place. Difficulties in communicating with our customers’ employees and delivery delays due to COVID-19 may impact our ability to meet customer demand, and thus decrease revenue into next quarter and possibly into 2021 and negatively impact our financial condition and results of operations.
On April 20, 2020, the Company entered into a Paycheck Protection Program Promissory Note (“PPP Note”) in the principal amount of $232,200 (“PPP Loan”) from BNB Bank (“PPP Loan Lender”). The PPP Loan was obtained pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (“SBA”). The PPP Loan was disbursed by the PPP Loan Lender on April 20, 2020 (the “Disbursement Date”). The PPP Loan bears an interest at 1.00% per annum and may be prepaid at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used by the Company for 2020 payroll costs, mortgage interest payments, rent and utilities. This has helped to offset some of the adverse effects of this pandemic and allowed us to serve our customers at a reduced capacity while still being able to fulfill open orders. The Company plans to apply for PPP Loan forgiveness.
We completed the design of a wide-band 3.5 GHz to 9.5 GHz cryogenic low noise amplifier (“LNA”) in the second quarter of 2020. We have also purchased a special cryocooler used to verify the performance of these new cryogenic LNAs. The LNA operates at 4 degrees Kelvin physical temperature, the same as used in quantum cloud computing applications for big data super-computers. The Company was able to achieve an ultra-low noise temperature of less than 5 degrees Kelvin, which we believe demonstrates its suitability for use in many other strategic applications such as 5G small cells and base stations, nanophysics (electron spin measurements), and deep space astronomy, among many other applications.
In August 2020, the Company entered into a non-disclosure agreement with Orban Microwave, Inc. (“Orban”), to further the goal of a joint initiative between the parties to sell, market, and develop products of both companies relating to the Company’s production and construction of microwave amplifiers, and/or antenna products by Orban, related to use in 5G/6G multiple-input, multiple-output (“MIMO”) antenna systems, Airline Wi-Fi Planar phased array flat panel antenna/amplifier systems, as well as other systems that may require a joint product. Subject to further discussion between the Company and Orban, the companies may participate in individually buying each other’s products for a customer when necessary with a separate agreement defining the details of the transactions. Any definitive joint venture agreement is subject to further negotiation and there can be no assurance that the Company and Orban will succeed in producing joint products.
On November 20, 2020, we entered into a business loan agreement with BNB Bank (the “BNB LOC”), pursuant to which we received a business line of credit for $750,000, maturing on November 1, 2021, and issued to BNB Bank a promissory note in the principal amount of $750,000. The interest rate of the promissory note is subject to change from time to time based on changes to the Wall Street Journal Prime Rate Index. Interest shall accrue on any due but unpaid principal amount in amount equal to the Wall Street Journal Prime Rate Index, plus 1%. The Company is obligated to pay the entire principal amount, plus all accrued but unpaid interest on November 1, 2021. In addition, the Company is obligated to pay regular monthly payments of all accrued but unpaid interest, beginning January 1, 2021. The Company has the option to prepay all or any portion of the amount owed under the BNB LOC prior to its due date without any penalty. The BNB LOC will be evaluated monthly on a base formula advancing 75% of accounts receivable aged less than 90 days and 50% of inventory raw materials. In connection with the loan, Amplitech Group, Inc. and Amplitech, Inc. granted the lender a security interest in all of their respective assets and Amplitech Group, Inc., as well as Mr. Maqbool, our, chairman, president, chief executive officer and controlling shareholder (the “Guarantors”) agreed to guarantee the loan. |
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| Table of Contents |
| Intellectual Property
We plan to leverage our existing proprietary intellectual property and trade secrets that are used in small volume niche markets by patenting the proprietary intellectual property and expanding our capabilities through strategic partnerships, joint ventures, and mergers and acquisitions with key industry leaders in the 5G/6G, quantum computing, and cybersecurity markets. We believe our unique technology will be a core component in these rapidly emerging technology sectors. We have completed our first three provisional filings covering the following areas: | ||
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| • | Ultra-Low Noise Monolithic Microwave Integrated Circuits (MMICs) Amplifier Techniques and Development for All Wireless, Satcom, and Space Applications, which covers our basic Low Noise Amplifier technology; |
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| • | Ultra-Low Noise Amplifiers/MMICS Optimized For Cryogenic Temperatures for Quantum Computing, Nanophysics, and Deep Space Astronomy Applications, which covers big data, cloud, and almost all types of IoT and wireless communications; and |
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| • | Low Noise Amplifiers/Front-Ends Optimized for Use in 5G Networks, and all the wireless technologies enabling the 5G infrastructure, which covers cellular base stations, cellphone handsets, high-speed internet earth stations and satellites. |
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| In addition to these filings, we plan to file up to 33 additional patents in 2021 to protect the proprietary intellectual property that we currently employ in our products. Please see “Our Business —Intellectual Property “ for a more in-depth description of our plans around our intellectual property.
Listing on the Nasdaq Capital Market
Our common stock is currently quoted on the OTCQB Market. In connection with this offering, we intend to apply to list our common stock and the Warrants on the Nasdaq Capital Market (“Nasdaq”) under the symbols “AMPG” and “AMPGW,” respectively. If our listing application is approved, we expect to list our common stock and the Warrants on Nasdaq upon consummation of the offering, at which point our common stock will cease to be traded on the OTCQB Market. No assurance can be given that our listing application will be approved. This offering will occur only if Nasdaq approves the listing of our common stock and Warrants. Nasdaq listing requirements include, among other things, a stock price threshold. As a result, prior to effectiveness, we will need to take the necessary steps to meet Nasdaq listing requirements, including but not limited to a reverse split of our outstanding common stock. If Nasdaq does not approve the listing of our common stock, we will not proceed with this offering. There can be no assurance that our common stock will be listed on the Nasdaq.
Reverse Stock Split
On December 7, 2020, our stockholders approved a reverse stock split within the range of 20-to-1 to 200-to-1 of our issued and outstanding shares of common stock and authorized the Board of Directors, in its discretion, to determine the final ratio and effective date in connection with the reverse stock split. The reverse stock split will not impact the number of authorized shares of common stock which will remain at 500,000,000 shares. The share and per share information in this prospectus do not reflect such reverse stock split of the issued and outstanding shares of our common stock to occur on or immediately following the effective date of the registration statement of which this prospectus forms a part. This prospectus will be amended by an amendment to this registration statement to reflect such number and the effect of such reverse stock split.
Principal Risks
We are subject to various risks discussed in detail under “Risk Factors,” which include risks related to the following: | ||
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| • | our history of losses; |
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| • | the ongoing COVID-19 pandemic; |
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| • | our ability to compete; |
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| • | changes in our product mix and resulting impact on gross margin; |
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| • | the ability of our products and services to function as expected; |
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| • | our ability to successfully protect our intellectual property rights, and claims of infringement by others; |
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| • | order and shipment uncertainties; | ||
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| • | failure to remediate material weaknesses in internal accounting controls and failure to implement proper and effective internal controls; | ||
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| • | our need to raise additional capital; | ||
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| • | cybersecurity threats and incidents; | ||
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| • | the dilution of our shares as a result of the issuance of additional shares in connection with financing arrangements; | ||
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| • | the volatility of our stock price; | ||
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| • | the decline in the price of our stock due to offers or sales of substantial number of shares; | ||
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| • | the limited trading volume and price fluctuations of our stock; | ||
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| • | the ability of our Chairman, President and Chief Executive Officer to control a significant number of shares of our voting capital; | ||
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| • | the immediate and substantial dilution of the net tangible book value of our common stock; | ||
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| • | the speculative nature of Warrants; | ||
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| • | provisions in the Warrants may discourage a third-party from acquiring us; | ||
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| • | our ability to meet the initial or continuing listing requirements of the Nasdaq Capital Market; and | ||
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| • | we intend to effect a reverse stock split of our outstanding common stock immediately following the effective date but prior to the closing of the offering; however, the reverse stock split may not increase our stock price sufficiently and we may not be able to list our common stock on the Nasdaq Capital Market in which case this offering may not be completed. | ||
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| Corporate Information
AmpliTech Group, Inc. was incorporated in under the laws of the State of Nevada on December 30, 2010 as Bayview Acquisition Corp. Our principal offices are located at 620 Johnson Avenue, Bohemia, New York 11716 and our telephone number is (631) 521 7831. On August 13, 2012, we acquired AmpliTech Inc., by issuing 16,675,000 shares of our 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 1,200,000 shares of the outstanding 17,785,000 shares of Company common stock, resulting in a change in control. Accordingly, the transaction was accounted for as a reverse acquisition in which AmpliTech, Inc. was deemed to be the accounting acquirer, and the operations of the Company were consolidated for accounting purposes. The capital balances have been retroactively adjusted to reflect the reverse acquisition.
On September 12, 2019, AmpliTech Group Inc. acquired substantially all of the operating assets of Specialty Microwave Corporation (SMW), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and 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%. The Company also entered into a five-year lease on the property located at 120 Raynor Avenue, Ronkonkoma, NY.
Our website address is www.amplitechinc.com. We have not incorporated by reference into this prospectus the information included on or linked from our website and you should not consider it to be part of this prospectus. | ||||
| 5 |
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| Summary of the Offering |
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| Issuer: | AmpliTech Group, Inc. |
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| Securities offered by us: | Units, each Unit consisting of one share of our common stock and one warrant to purchase one share of our common stock. Each warrant will have an exercise price of $ per share (100% of the assumed public offering price of one unit), is exercisable immediately and will expire five (5) years from the date of issuance. The Units will not be certificated or issued in stand-alone form. The shares of our common stock and the warrants comprising the Units are immediately separable upon issuance and will be issued separately in this offering. |
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| Number of shares of common stock offered by us: | shares |
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| Number of Warrants offered by us: | Warrants to purchase shares of common stock |
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| Assumed public offering price: | $ per Unit, which is the mid-point of the estimated offering price range described on the cover of this prospectus (1) |
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| Shares of common stock outstanding prior to the offering (2): | 51,588,958 shares |
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| Shares of common stock outstanding after the offering (3): | shares (assuming none of the Warrants issued in this offering are exercised) |
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| Over-allotment option: | We have granted a 45-day option to the underwriter to purchase up to additional shares of common stock at a price of $ per share (based on an assumed offering price of $ per Unit) and/or additional warrants at a price of $ per warrant less, in each case, the underwriting discounts payable by us, in any combination solely to cover over-allotments, if any. If the underwriter exercises the option in full, the total underwriting discounts and commissions payable by us will be $ and the total proceeds to us, before expenses, will be $ . |
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| Use of proceeds: | We estimate that we will receive net proceeds of approximately $ from our sale of Units in this offering, after deducting underwriting discounts and estimated offering expenses payable by us. We intend to use the net proceeds of this offering to provide funding for the following purposes: research and development; debt repayment; engineering, operations, quality inspection, information technology and sales force expansion; marketing and sales and working capital. See “Use of Proceeds.” |
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| Description of the Warrants: | The exercise price of the Warrants is $ per share (100% of the assumed public offering price of one unit). Each Warrant is exercisable for one share of common stock, subject to adjustment in the event of stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting our common stock as described herein. A holder may not exercise any portion of a Warrant to the extent that the holder, together with its affiliates and any other person or entity acting as a group, would own more than 4.99% of the outstanding common stock after exercise, as such percentage ownership is determined in accordance with the terms of the Warrants, except that upon notice from the holder to us, the holder may waive such limitation up to a percentage, not in excess of 9.99%. Each Warrant will be exercisable immediately upon issuance and will expire five years after the initial issuance date. The terms of the Warrants will be governed by a Warrant Agreement, dated as of the effective date of this offering, between us and Manhattan Transfer Registrar Co, as the warrant agent (the “Warrant Agent”). This prospectus also relates to the offering of the shares of common stock issuable upon exercise of the Warrants. For more information regarding the warrants, you should carefully read the section titled “Description of Securities—Warrants” in this prospectus. |
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| Underwriter’s Warrants: | The registration statement of which this prospectus is a part also registers for sale warrants (the “Underwriter’s Warrants”) to purchase shares of our common stock (based on an offering price of $ per Unit, which is the mid-point of the estimated offering price range described on the cover of this prospectus) to Maxim Group LLC (the “underwriter”), as a portion of the underwriting compensation in connection with this offering. The Underwriter’s Warrants will be exercisable at any time, and from time to time, in whole or in part, during the three year period commencing 180 days following the closing date of this offering at an exercise price of $ (110% of the assumed public offering price of the Units). Please see “Underwriting—Underwriter’s Warrants” for a description of these warrants. | |
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| Underwriter compensation: | In connection with this offering, the underwriter will receive an underwriting discount equal to 7.5% of the gross proceeds from the sale of Units in the offering. We will also reimburse the underwriter for certain out-of-pocket actual expenses related to the offering See “Underwriting.” | |
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| Trading symbol: | Our common stock is presently quoted on the OTCQB under the symbol “AMPG.” We plan to file an application to have our common stock and the Warrants offered in the offering listed on the Nasdaq Capital Market under the symbols “AMPG” and “AMPGW,” respectively. | |
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| Reverse stock split: | On December 7, 2020, our stockholders approved a reverse stock split within the range of 1-for-20 to 1-for-200 of our issued and outstanding shares of common stock and authorized the Board of Directors, in its discretion, to determine the final ratio and effective date in connection with the reverse stock split. We intend to effectuate the reverse split of our common stock in a ratio to be determined by the Board of Directors immediately following the effective date but prior to the closing of the offering. All share and per share information in this prospectus do not reflect the proposed reverse stock split. | |
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| Risk factors: | Investing in our securities involves a high degree of risk and purchasers of our securities may lose their entire investment. See “Risk Factors” and the other information included and incorporated by reference into this prospectus for a discussion of risk factors you should carefully consider before deciding to invest in our securities. | |
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| Dividends: | We do not anticipate paying dividends on our common stock for the foreseeable future. | |
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| Lock-up Agreements: | We and our directors, officers and certain shareholders have agreed with the underwriter not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our common stock or securities convertible into common stock for a period of 180 days after the date of this prospectus. See “Underwriting—Lock-Up Agreements.” |
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| (1) | The assumed public offering price of $ per Unit is the mid-point of the range described on the cover of this prospectus. The actual number of Units we will offer will be determined based on the actual public offering price and the reverse split ratio will be determined based on the stock price. |
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| (2) | Unless we indicate otherwise, the number of shares of our common stock outstanding is based on 51,588,958 shares of common stock outstanding on December 10, 2020, but does not include, as of that date: |
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| • | 25,000,000 shares of our common stock that are reserved for equity awards that may be granted under our equity incentive plan that will be effective on December 14, 2020; |
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| • | 100,000 shares of common stock issuable upon conversion of our outstanding Series A Convertible Preferred Stock and 40,000,000 shares of common stock issuable upon exercise of an option to purchase Series A Convertible Preferred Stock; and |
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| • | 1,000,000 shares of common stock issuable to the underwriter or its designees at the closing of this offering for services unrelated to this offering. |
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| (3) | The number of shares outstanding after this offering is based on 51,588,958 shares of common stock outstanding on December 10, 2020, and gives effect to the issuance of 1,000,000 shares of common stock to the underwriter or its designees at the closing but does not include, as of that date: |
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| • | shares of our common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $ per share; |
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| • | 25,000,000 shares of our common stock that are reserved for equity awards that may be granted under our equity incentive plan that will be effective on December 14, 2020; |
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| • | 100,000 shares of common stock issuable upon conversion of our outstanding Series A Convertible Preferred Stock and 40,000,000 shares of common stock issuable upon exercise of an option to purchase Series A Convertible Preferred Stock; |
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| • | exercise of the Underwriter’s Warrants; and |
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| • | exercise of the underwriter’s option to purchase additional shares and/or Warrants from us in this offering. |
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| Except as otherwise indicated, all information in this prospectus assumes: |
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| • | no exercise of the Underwriter’s Warrants; and |
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| • | no exercise of the underwriter’s option to purchase additional shares and/or Warrants from us in this offering. |
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Any investment in our securities involves a high degree of risk. You should consider carefully the risks and uncertainties described below and all information contained in this prospectus, before you decide whether to purchase our securities. If any of the following risks or uncertainties actually occurs, our business, financial condition, results of operations and prospects would likely suffer, possibly materially. In addition, the trading price of our common stock could decline due to any of these risks or uncertainties, and you may lose part or all of your investment.
Risks Relating to our Business
We have had a history of losses, and we may incur additional losses in the future. We have incurred losses in various years through 2020, and we may continue to incur additional losses in the future. We had a net loss of $549,219 for the nine months ended September 30, 2020. As such, we cannot guarantee that we will become and then maintain profitability in the future. Our ability to secure and sustain profitability is based on numerous factors, many of which are out of our control, including the continued market acceptance of our current and new products for 5G, cryogenic quantum computing, and internet of things (IoT) MMICs. We may not be able to generate sufficient revenue or sell a sufficient volume of products to make a profit. Due to the uncertainty of the market and environment, among other uncertainties, AmpliTech may need additional funding after the offering to become profitable.
Our business, results of operations and financial condition may be adversely impacted by the recent COVID-19 pandemic. The novel strain of the coronavirus (COVID-19) has spread globally and has resulted in authorities imposing, and businesses and individuals implementing, numerous unprecedented measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns. These measures have temporarily impacted our workforce and operations, and some of the operations of our customers, vendors, suppliers, and partners. Some of the countries in which we operate has been affected by the outbreak and taken measures to try to contain it. The ultimate impact and efficacy of government measures and potential future measures is currently unknown. There is uncertainty regarding the business impacts from such measures and potential future measures. While we have been able to continue our operations through a combination of work-from-home and social distancing policies implemented to protect employees, these measures have resulted in reduced workforce availability. We opened May 5, 2020 with the CDC guidelines in place. Restrictions on our access to customer facilities may impact our ability to meet customer demand and could affect our financial condition and results of operations. The extent to which our operations and prospects may be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including the frequency and severity of future outbreaks and any corresponding actions by government authorities to contain the outbreak or treat its impact. Even after the COVID-19 pandemic is contained or has otherwise subsided, we may experience materially adverse impacts to our business due to any resulting economic recession or depression. Furthermore, the impacts of worsening global economic conditions and the continued disruptions to and volatility in the financial markets remain unknown. The impact of the COVID-19 pandemic may also exacerbate other risks discussed in these risk factors, any of which could have a material effect on us. This situation is ongoing and additional impacts may arise that we are not aware of currently.
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 Locus Microwave, Lucix, Cernex, Erzia, HEICO and L-3 Harris Technologies. 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 are able to devote greater resources to the development, promotion, sale and support of their products. These competitors may also have the ability to 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.
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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 quality or availability of our products or any increase in the number of suppliers that such a customer uses 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:
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| • | maintain and increase our market share and the strength of our brand in amplifiers; |
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| • | maintain and expand our relationships with channel partners; |
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| • | develop innovative, differentiated, high-performance products relative to our competitors’ solutions; and |
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| • | 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
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 exacting 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, 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.
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If we are unable to fix errors or other problems, we could experience:
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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 that may vigorously pursue, protect and enforce their intellectual property rights. We may in the future be required to license patent and other intellectual property rights to technologies that are important to our business, which may be costly or prohibitively expensive to continue to operate our business. We may also receive assertions against us, our customers or distributors, 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 and distributor agreements require us to indemnify and defend our customers or distributors 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 distributors 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:
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| • | expend significant resources to develop non-infringing products, processes or technology; |
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| • | 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 |
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| • | 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 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 similar to 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 event, 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.
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 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 imposed by the Trump administration and by the COVID-19 pandemic. Our customers can cancel purchase orders or defer the shipments of our products under certain circumstances with little or no advance notice to us. 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 are able to sell to our customers or channel partners, we will incur losses and our results of operation and financial condition will be harmed.
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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 Office. Mr. Maqbool is not bound by employment contracts 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 limited number of personnel for the assembling and testing processes. We do not know whether we will be able to retain all of these personnel as we continue to pursue our business strategy. As the source of our technical and product innovations, our design and technical personnel represent 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 a material weakness 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 as of September 30, 2020. We do not expect to be able to remediate this material weakness until after this Offering. 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.
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 a material weakness and may find additional areas for improvement in the future. Remediating this material weakness 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 of time 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.
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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 unforeseen circumstances or 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 of your investment.
Our secured indebtedness could have important consequences to you. For example, it could:
| • | limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions and other general corporate requirements; | ||||
| • | expose us to interest rate fluctuations for our financing that has a variable interest rate on the debt; | ||||
| • | require us to dedicate a portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow for operations and other purposes; | ||||
| • | limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and | ||||
| • | place us at a competitive disadvantage compared to competitors that may have proportionately less debt and greater financial resources. | ||||
In addition, our ability to make scheduled payments or refinance our obligations depends on our successful financial and operating performance, cash flows and capital resources, which in turn depend upon prevailing economic conditions and certain financial, business and other factors, many of which are beyond our control. These factors include, among others:
| • | economic and demand factors affecting our industry; | |
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| • | pricing pressures; |
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| • | increased operating costs; |
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| • | competitive conditions; and |
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| • | other operating and financial difficulties, including due to the ongoing COVID-19 pandemic. |
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell material assets or operations, obtain additional capital or restructure our debt. In the event that we are required to dispose of material assets or operations to meet our debt service and other obligations, the value realized on such assets or operations will depend on market conditions and the availability of buyers. Accordingly, any such sale may not, among other things, be for a sufficient dollar amount. Certain of our obligations are secured by a security interest in all of our assets. The foregoing encumbrances may limit our ability to dispose of material assets or operations. We also may not be able to restructure our indebtedness on favorable economic terms, if at all.
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Our loan agreement contains various covenants limiting the discretion of our management in operating our business. Our business loan agreement contains, subject to certain carve-outs, various restrictive covenants that limit our management’s discretion in operating our business. In particular, these instruments limit our ability to, among other things:
| • | except for debt incurred in the normal course of business, create, incur or assume indebtedness for borrowed money, including capital leases; | |
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| • | sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of our assets (except as may be permitted by the agreement); or |
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| • | sell with recourse any of our accounts. |
If we fail to comply with the restrictions in our loan agreement, a default may allow the lender under the relevant instruments to accelerate the repayment obligation of the related debt and to exercise its remedies under these agreements, which will typically include the right to declare the principal amount of that debt, together with accrued and unpaid interest and other related amounts, immediately due and payable, to exercise any remedies the lender may have to foreclose on assets that are subject to liens securing that debt and to terminate any commitments they had made to supply further funds. The loan agreement also contains various covenants that may limit our ability to pay dividends.
Our chairman, president, chief executive officer and controlling shareholder, Mr. Fawad Maqbool, has provided a personal guarantee using his personal property, including his equity interest in our company, to secure a line of credit for the Company. A default under the credit facility could result in the sale by court order of Mr. Maqbool’s property, including his equity interest in the Company, and the resultant sale of those shares. A sale of such equity interest whether by court order or otherwise would likely cause a significant drop in the price of our common stock. Moreover, Mr. Maqbool, who could thereafter have a substantially smaller or no equity interest in our company, could have substantially less or no personal stake or interest in the commercial success of our company.
On November 20, 2020, we entered into a business loan agreement with BNB Bank, pursuant to which we received a business line of credit for $750,000, maturing on November 1, 2021 (the “BNB LOC”), and issued to BNB Bank a promissory note in the principal amount of $750,000.
In order to procure the BNB LOC, Amplitech Group, Inc., as well as Mr. Maqbool, our, chairman, president, chief executive officer and controlling shareholder (the “Guarantors”) agreed to guarantee the loan. The guarantees provided by the two Guarantors cover the full amount of the loans, interest, and any damages and related costs. Under the personal guarantees provided by the two Guarantors, the two Guarantors have agreed to perform the obligations under the agreement in the event that the Company is unable to perform its obligations. In the event that the guarantee is enforced against Mr. Maqbool, he could be obliged to use his personal property, including the equity interest in our company to fulfill his obligations under the BNB LOC. Mr. Maqbool owes a fiduciary duty of loyalty to us. However, there is potential for conflicts of interest between his personal interests and ours whether his guaranty is called upon or not. No assurance can be given that material conflicts will not arise that could be detrimental to our operations and financial prospects
As of the date of this prospectus, Mr. Maqbool beneficially owned approximately 56% of our outstanding share capital, and he will beneficially own approximately ☑% of our outstanding share capital upon completion of this offering, assuming no exercise of the underwriters' over-allotment option. A sale of a portion or all of Mr. Maqbool’s equity interest, whether voluntary or as a result of a court order, would likely cause a significant drop in the price of our common stock and could adversely affect our business operations, our business relationships and the marketability of our common stock and substantially reduce Mr. Maqbool’s beneficial ownership interest.
If Mr. Maqbool’s beneficial ownership of the Company is substantially reduced or eliminated, he would have little or no stake or interest in the business operations of the Company, and he could potentially leave the Company or not perform his duties as diligently as he otherwise might have.
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. 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. To date, we have not been subject to cyber-attacks or other cyber incidents which, individually or in the aggregate, resulted in a material impact to our operations or financial condition.
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 regulations, 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.
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, as a means 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:
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| • | difficulties in integrating acquired operations or products, including the loss of key employees from, or customers of, acquired businesses; |
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| • | diversion of management’s attention from our existing businesses; |
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| • | adverse effects on existing business relationships with suppliers and customers; |
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| • | adverse impacts of margin and product cost structures different from those of our current mix of business; and |
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| • | 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 are able to 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.
Risks Relating to our Common Stock
The price of our common stock could be volatile and could decline following this offering 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:
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| • | quarterly variations in our results of operations or those of our competitors; |
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| • | delays in end-user deployments of products; |
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| • | announcements by us or our competitors of acquisitions, new products, significant contracts, commercial relationships or capital commitments; |
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| • | intellectual property infringements; |
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| • | our ability to develop and market new and enhanced products on a timely basis; |
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| • | commencement of, or our involvement in, litigation; |
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| • | major changes in our Board of Directors or management, including the departure of Mr. Maqbool; |
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| • | changes in governmental regulations; |
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| • | changes in earnings estimates or recommendations by securities analysts; |
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| • | the impact of the COVID-19 pandemic on capital markets; |
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| • | our failure to generate material revenues; |
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| • | our public disclosure of the terms of this financing and any financing which we consummate in the future; |
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| • | any acquisitions we may consummate; |
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| • | announcements by us or our competitors of significant contracts, new services, acquisitions, commercial relationships, joint ventures or capital commitments; |
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| • | cancellation of key contracts; |
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| • | short selling activities; |
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| • | changes in market valuations of similar companies; and |
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| • | general economic conditions and slow or negative growth of end markets. |
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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 particular companies, such as the uncertainty associated with the COVID-19 pandemic. 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.
Future sales or perceived sales of our common stock could depress our stock price. This prospectus covers [_____] shares of common stock. If the holders of these shares 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.
Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline. The existence of shares of common stock issuable upon conversion of outstanding shares of Series A Convertible Preferred Stock, creates a circumstance commonly referred to as an “overhang” which can act as a depressant to our common stock price. The existence of an overhang, whether or not sales have occurred or are occurring, also could make our ability to raise additional financing through the sale of equity or equity-linked securities more difficult in the future at a time and price that we deem reasonable or appropriate. If our existing shareholders and investors seek to sell a substantial number of shares of our common stock, such selling efforts may cause significant declines in the market price of our common stock.
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 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.
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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 our shares of outstanding common stock and, after the lock-up agreement with the underwriter expires, 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 effective control over actions requiring stockholder approval. As of December 10, 2020, Fawad Maqbool, our Chairman, President Chief Executive Officer, held 1,000 shares, or 100%, of Series A Convertible Stock issued and outstanding, and options to purchase an aggregate of 400,000 shares of Series A Convertible Stock Each share of Series A Convertible Preferred is entitled to 100 votes when the vote of holders of the Company’s common stock is sought. As a result, Mr. Maqbool has the ability to control 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 has the ability to control the management and affairs of our company. Accordingly, any investors who purchase shares will 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. |
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.
Risks Relating to this Offering and our Reverse Stock-Split
Investors in this offering will experience immediate and substantial dilution in net tangible book value. The public offering price will be substantially higher than the net tangible book value per share of our outstanding shares of common stock. As a result, investors in this offering will incur immediate dilution of $ per share based on the assumed public offering price of $ per Unit, the mid-point of the estimated offering price range described on the cover of this prospectus. Investors in this offering will pay a price per share that substantially exceeds the book value of our assets after subtracting our liabilities. See “Dilution” for a more complete description of how the value of your investment will be diluted upon the completion of this offering.
Participation in this offering by certain of our directors and their affiliates would reduce the available public float for our shares. It is possible that one or more of our directors or their affiliates or related parties could purchase common stock and warrants in this offering at the public offering price and on the same terms as the other purchasers in this offering. However, these persons or entities may determine not to purchase any shares or warrants in this offering, or the underwriter may elect not to sell any shares or warrants in this offering to such persons or entities. Any purchases by our directors or their affiliates or related parties would reduce the available public float for our shares because such shareholders would be restricted from selling the common stock and warrants by a lock-up agreement they have entered into with the underwriter and by restrictions under applicable securities laws. As a result, any purchase of common stock and warrants by such shareholders in this offering may reduce the liquidity of our common stock relative to what it would have been had these common stock and warrants been purchased by investors that were not affiliated with us.
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Our management will have broad discretion over the use of proceeds from this offering and may not use the proceeds effectively. Our management will have broad discretion over the use of proceeds from this offering. We intend to use the net proceeds from this offering to provide funding for the following purposes: research and development; engineering, operations, quality inspection, information technology and sales force expansion; marketing and sales and working capital. Our management will have considerable discretion in the application of the net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. The net proceeds may be used for corporate purposes that do not improve our operating results or enhance the value of our securities.
Our expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering. The amounts and timing of our actual use of the net proceeds will vary depending on numerous factors, including amount of cash used in our operations, which can be highly uncertain, subject to substantial risks and can often change. Our management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the net proceeds of this offering.
The failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.
Warrants are speculative in nature. The Warrants offered in this offering 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 Warrants may exercise their right to acquire the common stock and pay an exercise price of $ per share (100% of the assumed public offering price of a Unit), prior to five years from the date of issuance, after which date any unexercised Warrants will expire and have no further value. In addition, there is no established trading market for the Warrants and, although we intend to apply to list the warrants on Nasdaq, there can be no assurance that an active trading market will develop.
Holders of the Warrants will have no rights as a common stockholder until they acquire our common stock. Until holders of the Warrants acquire shares of our common stock upon exercise of the Warrants, the holders will have no rights with respect to shares of our common stock issuable upon exercise of the Warrants. Upon exercise of the 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.
There is no established market for the Warrants to purchase shares of our common stock being offered in this offering. There is no established trading market for the warrants. Although we intend to apply to list the warrants on the Nasdaq Capital Market there can be no assurance that there will be an active trading market for the Warrants. Without an active trading market, the liquidity of the warrants will be limited.
Provisions of the Warrants offered by this prospectus could discourage an acquisition of us by a third party. Certain provisions of the Warrants offered by this prospectus could make it more difficult or expensive for a third party to acquire us. The Warrants prohibit us from engaging in certain transactions constituting “fundamental transactions” unless, among other things, the surviving entity assumes our obligations under the warrants. These and other provisions of the Warrants offered by this prospectus could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to you.
Even if the reverse stock split achieves the requisite increase in the market price of our common stock, we cannot assure you that we will be able to continue to comply with the minimum bid price requirement of the Nasdaq Capital Market. Even if the reverse stock split achieves the requisite increase in the market price of our common stock to be in compliance with the minimum bid price of the Nasdaq Capital Market, there can be no assurance that the market price of our common stock following the reverse stock split will remain at the level required for continuing compliance with that requirement. It is not uncommon for the market price of a company’s common stock to decline in the period following a reverse stock split. If the market price of our common stock declines following the effectuation of the reverse stock split, the percentage decline may be greater than would occur in the absence of a reverse stock split. In any event, other factors unrelated to the number of shares of our common stock outstanding, such as negative financial or operational results, could adversely affect the market price of our common stock and jeopardize our ability to meet or maintain the Nasdaq Capital Market’s minimum bid price requirement.
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Even if the reverse stock split increases the market price of our common stock and we meet the initial listing requirements of the Nasdaq Capital Market, there can be no assurance that we will be able to comply with the continued listing standards of the Nasdaq Capital Market, a failure of which could result in a de-listing of our common stock. The Nasdaq Capital Market requires that the trading price of its listed stocks remain above one dollar in order 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 reverse stock split may decrease the liquidity of the shares of our common stock. The liquidity of the shares of our common stock may be affected adversely by the reverse stock split given the reduced number of shares that will be outstanding following the reverse stock split, especially if the market price of our common stock does not increase as a result of the reverse stock split. In addition, the reverse stock split may increase the number of shareholders who own odd lots (less than 100 shares) of our common stock, creating the potential for such shareholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.
Following the reverse stock split, the resulting market price of our common stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve. Although we believe that a higher market price of our common stock may help generate greater or broader investor interest, there can be no assurance that the reverse stock split will result in a share price that will attract new investors, including institutional investors. In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our common stock may not necessarily improve.
There is no assurance that once listed on the Nasdaq Capital Market we will not continue to experience volatility in our share price. The OTCQB Venture Market, where our common stock is currently quoted, is an inter-dealer, over-the-counter market that provides significantly less liquidity than the Nasdaq Capital Market. Our stock is thinly traded due to the limited number of shares available for trading on the OTCQB Venture Market thus causing large swings in price. As such, investors and potential investors may find it difficult to obtain accurate stock price quotations, and holders of our common stock may be unable to resell their securities at or near their original offering price or at any price. Our public offering price per Unit may vary from the market price of our common stock after the offering. If an active market for our stock develops and continues, our stock price may nevertheless be volatile. If our stock experiences volatility, investors may not be able to sell their common stock at or above the public offering price per Unit. Sales of substantial amounts of our common stock, or the perception that such sales might occur, could adversely affect prevailing market prices of our common stock and our stock price may decline substantially in a short period of time. As a result, our shareholders could suffer losses or be unable to liquidate their holdings. No assurance can be given that the price of our common stock will become less volatile when listed on the Nasdaq Capital Market.
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We estimate that the net proceeds from this offering will be approximately $ after deducting estimated underwriting discounts and estimated offering expenses payable by us. If the underwriter’s over-allotment option is exercised in full, we estimate that our net proceeds will be approximately $ . We intend to use the net proceeds from this offering, and any proceeds from the exercise of warrants, for the following purposes:
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| Engineering, operations, quality control, information technology and sales force expansion Marketing and Sales |
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The Company intends to use $ of the net proceeds to repay a business loan to BNB Bank at the interest rate of 6.75% per year, which matures in September 2026, and $ of the net proceeds to repay a note to Stephen Farber, the former owner of SMW, at the interest rate of 6% per year, which matures in September 2024.
The actual allocation of proceeds realized from this offering will depend upon our operating revenues and cash position and our working capital requirements and may change.
Therefore, as of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering. Accordingly, we will have discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the proceeds of this offering.
Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities. We anticipate that the proceeds from this offering will enable us to further grow the business and increase cash flows from operations.
A 50% increase (decrease) in the assumed public offering price of $ per Unit would increase (decrease) the expected net proceeds of the offering to us by approximately $ million, assuming that the number of shares of common stock sold by us remains the same. We may also increase or decrease the number of Units we are offering.
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The following table sets forth our capitalization as of September 30, 2020:
|
| • | on an actual basis; |
|
| • | on an as adjusted basis to reflect the issuance and sale by us of $ of Units in this offering at the assumed public offering price of $ per Unit, after deducting underwriting discounts and commissions and estimated offering expenses payable by us and the receipt by us of the proceeds of such sale. |
You should consider this table in conjunction with “Use of Proceeds” above as well as our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the notes to those financial statements for the three and six months ended September 30, 2020 included elsewhere in this prospectus.
|
|
| As of September 30, 2020 | |||||
|
|
| Unaudited, |
|
| Unaudited, | ||
| Cash and Cash Equivalents |
| $ | 425,876 |
|
| $ | |
| Total Current Liabilities |
|
| 952,273 |
|
|
| |
| Total Long Term Liabilities |
|
| 1,786,790 |
|
|
| |
| Stockholders’ Equity: |
|
|
|
|
|
| |
| Series A convertible preferred stock, par value $0.001, 401,000 shares authorized, 1,000 shares issued and outstanding |
|
| 1 |
|
|
| |
|
|
|
|
|
|
|
| |
| Series B convertible preferred stock, par value $0.001, 75,000 shares authorized, 0 shares issued and outstanding |
|
| - |
|
|
| |
| Common stock, par value $0.001, 500,000,000 shares authorized, 51,588,958 shares issued and outstanding |
|
| 51,589 |
|
|
| |
| Additional paid in capital |
|
| 1,923,824 |
|
|
| |
| Accumulated Deficit |
|
| (1,392,032 | ) |
|
| |
| Total Stockholders’ Equity |
| $ | 583,382 |
|
| $ | |
(1) The as adjusted information discussed above is illustrative only and will be further adjusted based on the actual public offering price and other terms of this offering determined at pricing.
A $1.00 increase (decrease) in the assumed public offering price of $ per Unit would increase (decrease) cash and cash equivalents, working capital, total assets, and total stockholders’ (deficit) equity by $ million, assuming that the number of Units offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discounts and commissions.
The above discussion and table are based on 51,588,958 shares outstanding as of September 30, 2020 and do not include, as of that date:
|
| • | 25,000,000 shares of our common stock that are reserved for equity awards that may be granted under our equity incentive plan that will be effective as of December 14, 2020; |
|
| • | 100,000 shares of common stock issuable upon conversion of our outstanding Series A Convertible Preferred Stock and 40,000,000 shares of common stock issuable upon exercise of an option to purchase Series A Convertible Preferred Stock;
|
|
| • | exercise of the Underwriter’s Warrants; and |
|
| • | exercise of the underwriter’s option to purchase additional shares and/or warrants from us in this offering. |
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| Table of Contents |
DETERMINATION OF OFFERING PRICE
The offering price of the Units has been negotiated between the underwriter and us considering our historical performance and capital structure, prevailing market conditions, and overall assessment of our business. Each Unit consists of one share of our common stock and a warrant to purchase one share of our common stock at an exercise price equal to $ which is % of the assumed public offering price of the Units.
Our common stock is currently quoted on the OTCQB under the trading symbol “AMPG.” Quotations on the OTCQB reflect inter-dealer prices, without retail mark-up, mark-down commission, and may not represent actual transactions. On December 9, 2020, the last reported sale price of our common stock was $0.23 per share.
Holders
As of December 8, 2020, we had approximately 54 shareholders of record of our common stock. The number of stockholders of record does not include certain beneficial owners of our common stock, whose shares are held in the names of various dealers, clearing agencies, banks, brokers and other fiduciaries.
Dividend Policy
We have never paid or declared any cash dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business. Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors our Board of Directors deems relevant.
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If you invest in our Units in this offering, your interest will be diluted to the extent of the difference between the assumed public offering price per share of common stock that is part of the Unit and the as adjusted net tangible book value per share of common stock immediately after this offering.
Our net tangible book value is the amount of our total tangible assets less our total liabilities. Our net tangible book value as of September 30, 2020 was $583,382, or $0.01 per share of common stock.
As adjusted net tangible book value is our net tangible book value after taking into account the effect of the sale of Units in this offering at the assumed public offering price of $ per Unit and after deducting the underwriting discounts and commissions and other estimated offering expenses payable by us and the issuance by us of 1,000,000 shares of common stock to the underwriter or its designees at the closing. Our as adjusted net tangible book value as of September 30, 2020 would have been approximately $ , or $ per share. This amount represents an immediate increase in as adjusted net tangible book value of approximately $ per share to our existing stockholders, and an immediate dilution of $ per share to new investors participating in this offering. Dilution per share to new investors is determined by subtracting as adjusted net tangible book value per share after this offering from the public offering price per share paid by new investors.
The following table illustrates this per share dilution:
| Assumed public offering price per share (attributing no value to the warrants) |
| $ |
| |
| Net tangible book value per share as of September 30, 2020 |
| $ | 0.01 |
|
| Increase in as adjusted net tangible book value per share after this offering |
| $ |
| |
| As adjusted net tangible book value per share after giving effect to this offering |
| $ |
| |
| Dilution in as adjusted net tangible book value per share to new investors |
| $ |
| |
A $1.00 increase (decrease) in the assumed public offering price of $ per Unit would increase (decrease) the as adjusted net tangible book value per share by $ , and the dilution per share to new investors in this offering by $ , assuming the number of Units offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.
The information above assumes that the underwriter does not exercise its over-allotment option. If the underwriter exercises its over-allotment option in full, the as adjusted net tangible book value will increase to $ per share, representing an immediate increase to existing stockholders of $ per share and an immediate dilution of $ per share to new investors.
The foregoing discussion and table do not take into account further dilution to new investors that could occur upon the exercise of outstanding warrants having a per share exercise price less than the per share offering price to the public in this offering.
We may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.
The above discussion and table are based on 51,588,958 shares outstanding as of September 30, 2020 (giving effect to the issuance of 1,000,000 shares of common stock to the underwriter or its designees at the closing). The discussion and table do not include, as of that date:
|
| • | 25,000,000 shares of our common stock that are reserved for equity awards that may be granted under our equity incentive plan that will be effective December 14, 2020; |
|
| • | 100,000 shares of common stock issuable upon conversion of our outstanding Series A Convertible Preferred Stock and 40,000,000 shares of common stock issuable upon exercise of an option to purchase Series A Convertible Preferred Stock;
|
|
| • | exercise of the Underwriter’s Warrants; and |
|
| • | exercise of the underwriter’s option to purchase additional shares and/or warrants from us in this offering. |
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| Table of Contents |
Business Overview
We design, engineer and assemble micro-wave component-based amplifiers that meet individual customer’s specifications. Our products consist of Radio Frequency (“RF”) amplifiers and related subsystems, operating at multiple frequencies from 50kHz to 44GHz, including Low Noise Amplifiers, Medium Power Amplifiers, Cryogenic amplifiers, oscillators, filters, and custom assembly designs. We also offer non-recurring engineering services on a project-by-project basis, for a predetermined fixed contractual amount, or on a time plus material basis.
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.
On September 12, 2019, Amplitech Group Inc. acquired substantially of the all operating assets of Specialty Microwave Corporation (“SMW”), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and 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%. The Company also entered into a five- year lease on the 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.
SMW 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.
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 is progressing significantly. We have introduced new products that will be manufactured through our SMW acquisition. The combined engineering and manufacturing resources is expected to complement the new product development of subsystems for satellite, wireless, and 5G infrastructures, as well as advanced military and commercial markets.
Recent Developments
The COVID-19 pandemic has caused significant worldwide disruption throughout the course of 2020 and resulted in the imposition of various public and private sector measures to try to contain the virus, on a local, state, national and international level, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns. These measures have temporarily impacted our workforce and operations and some of the operations of our customers, and vendors, suppliers, and partners. The ultimate impact and efficacy of government measures and potential future measures is currently unknown.
There is uncertainty regarding the business impacts from such measures and potential future measures. While we have been able to continue our operations through a combination of work-from-home and social distancing policies implemented to protect employees, these measures have resulted in reduced workforce availability. Accordingly, we resumed operations on May 5, 2020, with the CDC safeguard guidelines in place. Restrictions on our access to customer facilities may impact our ability to meet customer demand, and thus decrease revenue into next quarter and possibly into 2021 and negatively impact our financial condition and results of operations.
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| Table of Contents |
On April 20, 2020, the Company entered into a Paycheck Protection Program Promissory Note (“PPP Note”) in the principal amount of $232,200 (“PPP Loan”) from BNB Bank (“PPP Loan Lender”). The PPP Loan was obtained pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) administered by the US Small Business Administration (“SBA”). The PPP Loan was disbursed by the PPP Loan Lender on April 20, 2020 (the “Disbursement Date”). The PPP Loan bears an interest at 1.00% per annum. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used by the Company for 2020 payroll costs, mortgage interest payments, rent and utilities. This has helped to offset some of the adverse effects of this pandemic and allowed us to serve our customers at a reduced capacity but without experiencing any cancellation of our open orders. The Company plans to apply for PPE loan forgiveness.
In August 2020 the Company entered into a Non-Disclosure Agreement with Orban Microwave, Inc., to further the goal of a joint initiative between the parties to sell, market, and develop products of both companies relating to the production and construction of microwave amplifiers by AmpliTech, and/or antenna products by Orban Microwave, Inc., related to use in 5G/6G MIMO antenna systems, Airline Wi-Fi Planar phased array flat panel antenna/amplifier systems, as well as other systems that may require a joint product. In some cases, the companies may participate in individually buying each other’s products for a customer(s) when necessary with a separate agreement defining the details of the transactions.
We have completed the design of a wide-band 3.5 GHz to 9.5 GHz cryogenic low noise amplifier (LNA). The LNA operate at 4 degrees Kelvin physical temperature, the same as used in quantum cloud computing applications for big data super-computers. The Company was able to achieve an ultra-low noise temperature of less than 5 degrees Kelvin, which we believe demonstrates its suitability for use in many other strategic applications such as 5G small cells and base stations, nanophysics (electron spin measurements), and deep space astronomy, among many other applications.
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., a New York corporation, by issuing 16,675,000 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 1,200,000 shares of the outstanding 17,785,000 shares of Company common stock, resulting in a change in control. Accordingly, the transaction was accounted for as a reverse acquisition in which AmpliTech, Inc. was deemed to be the accounting acquirer, and the operations of the Company were consolidated for accounting purposes. The capital balances have been retroactively adjusted to reflect the reverse acquisition.
On September 12, 2019, Amplitech Group Inc. acquired substantially all of the assets of Specialty Microwave Corporation (“SMW”), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and 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%. The Company also entered into a five- year lease on the property located at 120 Raynor Avenue, Ronkonkoma, NY with an option to buy the property during the first two years of the lease for $1,200,000 and then at fair market value for the remainder of the lease term.
Our Products
Our products consist of RF amplifiers and related subsystems, operating at multiple frequencies from 50kHz to 44GHz, including Low Noise Amplifiers, Medium Power Amplifiers, and custom assembly designs.
Our existing product line includes the 18 to 40 GHz wide band low noise amplifier. It is designed mainly for wideband telecommunications such as military and space applications, point to point radios as well as test equipment.
AmpliTech has also introduced a new line of cryogenic amplifiers 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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In connection with the acquisition of the SMW business, we began designing and manufacturing passive microwave components and related subsystems that meet individual customer specifications for both domestic and international customers.
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 down 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 by integrators and manufacturers of various communication systems such as cellular base stations, simulators, and point to point wireless radios.
Waveguide to Coaxial Adapters
These adapters are used for all Satcom and Satellite internet gateway systems from S band to K band, or 2 GHz to 50 GHz.
Cryogenic Amplifiers
Designed to operate at 4k temperatures with industry low noise figures from 2-26 GHz range. With a low power dissipation of less than 10 mWatts these cryogenic amplifiers can be used in applications for quantum computing, nanophysics, astronomy, superconductor research as well as making significant impact to 5G applications.
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.
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Our Technology
Our products are supported by proprietary hybrid design topologies that create highly linear Radio Frequency (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 GsAs (Gallium Arsenide) and InP (Indium Phosphide) 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 |
|
| • | Use of negative bias is not necessary |
|
| • | Specially selected components with specific parameters that yield proprietary results |
|
|
| due to use in a particular configuration |
To date, our research and development activities have primarily been conducted on new product designs to the extent requested by our customers. The cost of our research and development activities is incorporated into the unit selling prices and, as such, is borne directly by these 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, cybersecurity, MMICs, IoT and wireless products for the future. For the nine months ended September 30, 2020 and 2019, the Company incurred research and development costs of $41,083 and $48,262, respectively. For the years ending December 31, 2019 and 2018, the Company has incurred research and development costs of $56,507 and $42,941, respectively.
Industry and Competition
Market Overview
We operate our business in the industry of high-power Radio Frequency (RF) semiconductor. 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-bandwidth 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 |
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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 OEM design, and manufacturing capabilities.
|
| • | Deliver high quality and feature improvements that service provider requires |
|
| • | 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 established players such as Locus Microwave, Lucix, Cernex, Erzia, HEICO and L-3 (Harris Corp.). 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 are able to devote greater resources to the development, promotion, sale and support of their products. These competitors may also have the ability to 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 on the basis of technology, cost, and design flexibility.
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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.
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. We intend to execute on key elements of our strategy to achieve this objective, including 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 (Original Equipment Manufacturers) |
|
| • | New product development |
|
| • | Commercializing of existing core technology into specific high-volume technology sectors and obtaining patents on such technology |
Manufacturing
Our manufacturing facilities are located at our corporate office in Bohemia, New York and in Ronkonkoma, New York. Our manufacturing process in Bohemia involves the assembly of numerous individual components and precise fine-tuning by production technicians. We believe our manufacturing facility is estimated to be capable of assembling up to 100 amplifiers per month. If we receive larger quantity orders that need to be fulfilled in a short time-frame, or in excess of our capacity at the main facility, we may outsource the assembly by sending kitted raw materials to a qualified contract assembly facility in the local Northeast.
Our manufacturing process in Ronkonkoma is dedicated to the design, manufacturing and testing of passive microwave components, RF subsystems, specialized electronics and related products.
We are currently certified to the ISO 9001:2015 standard. ISO 9001 is a uniform worldwide Quality Management System (QMS) standard.
Suppliers
Our material consists of purchased component parts used in our assembly process. The following table describes supplier concentration based upon the percentage of materials purchased from each supplier for 2019:
| Supplier A |
| $ | 203,705 |
|
|
| 34.10 | % |
| Supplier B |
|
| 115,832 |
|
|
| 19.39 | % |
| Supplier C |
|
| 40,066 |
|
|
| 6.71 | % |
| Supplier D |
|
| 36,765 |
|
|
| 6.16 | % |
| Supplier E |
|
| 21,848 |
|
|
| 3.66 | % |
| All other suppliers (approximately 51) |
|
| 179,218 |
|
|
| 30.00 | % |
| Total |
| $ | 597,434 |
|
|
| 100 | % |
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| Table of Contents |
Marketing
We employ an aggressive and focused approach to market our products, at various venues including trade shows, strategic alliances, website 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. In addition, during the COVID pandemic, we have increased our online and print ads as well as held virtual meetings and conferences.
We have sales representatives and distributors to channel our products throughout the Americas as well as to countries in Europe, the Middle East and South Asia.
During the 4th quarter of 2016, we entered into an agreement appointing an exclusive distributor of our products in the US, Canada, Mexico and South America.
In February 2018, the Company entered into an advisory agreement with Sunbiz Holding Corp in order to promote market awareness in Asia and the Middle East.
Trade Shows
We attend trade shows such as MTTS (Microwave Theory and Techniques Show), IMS (International Microwave Symposium), EDIC (Electronic Design Innovation Conference) European Microwave Symposium, SATCON, MILCOM and the American Institute of Physics Exhibit (APS). We also sponsor some trade shows to gain recognition and presence.
Strategic Alliances
We explore opportunities with global OEMs (Original Equipment Manufacturers) by working strategic alliances and that improve sales and presence in the marketplace and expand our product line and capabilities, thereby broadening our customer base. Two such companies are Orban Microwave and MPT Corp. The two companies have expertise in the planar phased array and GPS antennas as well as the ability to design and manufacture subsystems incorporating our low noise amplifiers and other products.
Website
We maintain a dynamic website to capture more business via worldwide customer searches for our products on the internet. Our website is available at www.amplitechinc.com.
Trade Magazines
We advertise our products in Microwave Product Digest.
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. Our customers include Viasat, L3 Harris Technologies, Raytheon, and Mercury Systems. As of December 31, 2019 and September 30, 2020, there were no customers that accounted for more than 10% of our total revenue. We have both direct and indirect relationships with these customers domestically and abroad via exclusive and non-exclusive sales representatives and various distributors.
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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, 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. 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.
Intellectual Property
We regard domain names, tradename, 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 in order 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, with the potential for up to 133 additional patent filings relating to our intellectual property and trade secrets. Part of the use of proceeds from the offering will be allocated to the filing of these patents and associated fees.
Employees
As of December 10, 2020, we have 19 full time employees. From time to time, we may hire additional workers on a contract basis as the need arises.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See the “Cautionary Statement Regarding Forward-Looking Statements” above. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this prospectus.
Business Overview
We design, engineer and assemble micro-wave component-based amplifiers that meet individual customer’s specifications. Our products consist of Radio Frequency (RF) amplifiers and related subsystems, operating at multiple frequencies from 50kHz to 44GHz, including Low Noise Amplifiers, Medium Power Amplifiers, Cryogenic amplifiers, oscillators, filters, and custom assembly designs. We also offer non-recurring engineering services on a project-by-project basis, for a predetermined fixed contractual amount, or on a time plus material basis.
On September 12, 2019, Amplitech Group Inc. acquired substantially all of the assets of Specialty Microwave Corporation (SMW), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, the customer lists, certain 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%. The Company also entered into a five- year lease on the 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.
SMW 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.
Our research and development initiative to expand our product line of low noise amplifiers, to include new 5G and wireless infrastructure products is progressing significantly. AMPG has introduced new products that will be manufactured as product line expansions for the products lines the company began producing as a result of the acquisition of SMW’s business. The combined engineering and manufacturing resources should complement the new product development of subsystems for satellite, wireless, and 5G infrastructures, as well as advanced military and commercial markets.
The COVID-19 Pandemic
The novel strain of the coronavirus identified in China in late 2019 (COVID-19) has globally spread throughout other areas such as Asia, Europe, the Middle East, and North America and has resulted in authorities imposing, and businesses and individuals implementing, numerous unprecedented measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns. These measures have temporarily impacted our workforce and operations and some of the operations of our customers, and vendors, suppliers, and partners. Some of the countries in which we operate have been affected by the outbreak and have already taken measures to try to contain it. The ultimate impact and efficacy of government measures and potential future measures is currently unknown.
There is uncertainty regarding the business impacts from such measures and potential future measures. While we have been able to continue our operations through a combination of work-from-home and social distancing policies implemented to protect employees, these measures have resulted in reduced workforce availability. Restrictions on our access to customer facilities may impact our ability to meet customer demand in the fourth quarter of 2020 and effect on our financial condition and results of operations. Some of our customers may have experienced disruptions in their operations, but our RFQ activity remains strong which may result in delayed orders in the fourth quarter of 2020 and into 2021.
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Results of Operations
For the Nine Months Ended September 30, 2020 and September 30, 2019
Revenues
Sales increased by $548,957 or approximately 27.2%, when comparing sales for the nine months ended September 30, 2020 of $2,567,379 to sales for the nine months ended September 30, 2019 of $2,018,422. AmpliTech sales were up by approximately $37,043. The purchase of Specialty Microwave helped increase sales in the telecommunication sector by $511,914.
Cost of Goods Sold and Gross Profit
Cost of goods sold increased by $598,663 or 60.9% for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. This increase is a result of the increase in sales, the increase in cost for outsourcing all orders with significant quantities and the hiring of an additional engineer and assemblers, as well as the addition of Specialty Microwave. As our product line becomes more customer specific, the cost of engineering support, assembly labor and custom parts have increased as well. Gross profit decreased by $49,706 or 4.80%, when comparing the first nine months of 2020 to the first nine months of 2019. Gross profit percentage decreased from 51.29% to 38.39%. Our overall operating performance through September 30, 2020 has been negatively impacted by the effect of the COVID-19 pandemic. While we have been able to continue our operations through a combination of work-from-home and social distancing policies implemented to protect employees, these measures have resulted in reduced workforce availability at some of our sites. These restrictions may impact our ability to meet customer demand temporarily and may affect our financial condition and results of operations, particularly if prolonged. However, our RFQ (Request for Quotation) activity remains strong and not all our customers and vendors have shut down, so our supply chain is still functioning. Although there is still uncertainty as to when the economy will return to normal, we expect to continue our business efforts and not shut down unless otherwise mandated by federal and state regulations, and/or more severe pandemic repercussions.
Selling, General and Administrative Expenses
General and administrative expenses increased from $1,021,448 for the first nine months of 2019 compared to $1,456,266 for the first nine months of 2020, an increase of $434,818 or approximately 42.57%. The Company experienced an increase in parent company expenses, such as accounting fees, director’s fees, patent consulting and legal fees and stock compensation expense relating to the issuance of warrants. The Company has hired a new director of sales and marketing associate to promote and expand existing and new product lines. We have also incurred additional equipment costs to help test hi frequency amplifiers. With the acquisition of Specialty Microwave, payroll, health insurance and rent have increased as well as other general and administrative costs.
Income (Loss) From Operations
As a result of the above, the Company had a loss from operations of $470,718 for the nine months ended September 30, 2020, compared to income from operations of $13,806 for the nine months ended September 30, 2019, an overall increase of $484,524 or 3509.52%
Other Income (Expenses)
Interest expense increased from $24,971 for the first nine months of 2019 compared to $78,501 for the first nine months of 2020, an increase of $53,530 or 214.37%. Interest expense increased primarily due to the additional financing received with the acquisition of Specialty Microwave, the financing of equipment purchases and line of credit borrowing.
Net Loss
The Company had a net loss $549,219 and $11,165 for the nine months ending September 30, 2020 and 2019, respectively.
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For Years Ended December 31, 2019 and December 31, 2018
Revenues
Sales increased from $2,397,418 for the year ended December 31, 2018 to $3,1202,630 for the year ended December 31, 2019, an increase of $725,212 or approximately 30.25%. These results were impacted by the shift in new product demand in the telecommunication and cryogenic sectors, an increase in orders through our distributor and through the purchase of the business of Specialty Microwave. Revenues for Specialty were $510,364.
Cost of Goods Sold and Gross Profit
Cost of Goods Sold increased to $1,556,654 in 2019 from $1,016,226 in 2018, an increase of $540,428 or approximately 53.18%. This increase was the direct result of the substantial increase in sales for the year as well as an increase in our outsourcing costs and raw materials. As our products become more customer specific, the cost of engineering support, assembly labor and custom parts have increased as well. In addition, we hired a new engineer and assembler as well as acquiring the employees of SMW. As a result, the gross profit was $1,565,976 for 2019 compared to $1,381,192 for 2018, an increase of $184,784 or 13.38%. Gross profit as a percentage of sales decreased to 50.15% from 57.62% as a result of the product mix with some of our products that are being outsourced having a lower gross profit margin and the general cost increase in labor and materials.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $1,483,979 in 2019 from $1,039,768 in 2018, an increase of $444,211, or approximately 42.73%. The Company experienced an increase in parent company expenses, such as director’s fees, IR/PR fees and stock compensation expense relating to the issuance of warrants and our “iP story”. The parent company also incurred approximately $77,000 in acquisition expenses relating to SMW. In addition, research and development expenses have increased approximately $15,000. The Company hired a new director of sales and a marketing associate to promote and expand existing and new product lines. Computer costs have increased due to computer software upgrades and the integration of Specialty Microwave.
Other Income (Expenses)
Interest expense increased by $63,621, or 511.80%, when comparing the year ended December 31, 2019 to the year ended December 31, 2018. The increase was primarily due to the additional borrowing on the Company’s line of credit, bank loan and the purchase of Specialty.
Net Income
The Company had net income of $5,945 and $328,993 in 2019 and 2018, respectively.
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Non- GAAP Financial Measures
EBITDA
|
|
| 2019 |
|
| 2018 |
| ||
| Net income |
| $ | 5,945 |
|
| $ | 328,993 |
|
| Add back: |
|
|
|
|
|
|
|
|
| Interest |
|
| 76,052 |
|
|
| 12,431 |
|
| Depreciation and amortization |
|
| 53,879 |
|
|
| 38,821 |
|
| Amortization of prepaid consulting |
|
| 65,640 |
|
|
| 37,604 |
|
| Amortization of right of use operating lease asset |
|
| 75,558 |
|
|
| - |
|
| Amortization of debt discount |
|
| 24,465 |
|
|
| - |
|
| EBITDA |
| $ | 301,539 |
|
| $ | 414,849 |
|
|
|
|
|
|
|
|
|
|
|
| Additional expenditures: |
|
|
|
|
|
|
|
|
| Stock based compensation |
| $ | 118,023 |
|
| $ | - |
|
| IP Story (1) |
|
| 10,000 |
|
|
| - |
|
| Acquisition costs (2) |
|
| 76,999 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA |
| $ | 506,231 |
|
| $ | 414,849 |
|
(1) IP Story costs relate to ipCG assisting Amplitech to formulate a comprehensive “ipStory” around its proprietary trade secrets, knowhow and technology.
(2) Acquisition costs were affiliated with the purchase of Specialty Microwave and include audit and legal expenses and other professional fees.
The Company uses certain non-GAAP financial measures, among other financial measures, to evaluate its operating performance, which represent the way the Company conducts and views its business. Management believes that excluding certain items that are not comparable from period to period, or do not reflect the Company’s underlying ongoing business, provides transparency for such items and helps investors and others compare and analyze operating performance from period to period. In the future, the Company expects to incur charges or adjustments similar in nature to those presented below; however, the impact to the Company’s results in a given period may be highly variable and difficult to predict. Our non-GAAP financial measures may not be comparable to similarly titled measures used by, or determined in a manner consistent with, other companies. While the Company considers the non-GAAP measures useful in analyzing its results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with GAAP.
Liquidity and Capital Resources
Net cash used in operating activities for the year ended December 31, 2019 was $20,015 resulting primarily from the operating changes in accounts receivable, inventory, prepaid expenses, accounts payable and customer deposits and the operating lease liability.
The net cash provided by operating activities for the year ended December 31, 2018 was $352,302 resulting primarily from net income and the operating changes in accounts receivable, inventory, prepaid expenses, accounts payable as well as customer deposits.
The net cash used in investing activities for the year ended December 31, 2019 and 2018 was $681,286 and $10,584, respectively, which was for the purchase of equipment and the cash paid for the acquisition of Specialty Microwave.
The net cash provided by financing activities for the year ended December 31, 2019 was $833,915 a result of proceeds received from notes payable offset by the repayment of the line of credit and finance lease.
The net cash used in financing activities for the year ended December 31, 2018 was $17,610 a result of repaying the line of credit.
We have historically financed our operations through net income, debt from third party lenders, notes issued to various private individuals and personal funds advanced from time to time by the majority shareholder, who is also the President and Chief Executive Officer of the Company.
As of December 31, 2019, we had cash and cash equivalents of $574,712, a working capital of $1,354,758 and an accumulated deficit of $842,813.
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As of September 30, 2020, we had $425,876 in cash and cash equivalents compared to $574,712 in cash and cash equivalents as of December 31, 2019. As of December 31, 2019, and September 30, 2020 we had a working capital surplus of $1,354,758 and $915,032, respectively. Stockholders’ equity was valued at $1,093,673 and $583,382 at December 31, 2019 and September 30, 2020, respectively.
Net cash used in operating activities was $514,298 for the nine months ended September 30, 2020, resulting primarily from the net loss and operating changes in accounts receivable, inventory, prepaid expenses and operating lease liability.
Net cash used in investing activities was a result of purchasing equipment. Net cash provided by financing activities for the nine months ended September 30, 2020 was $377,019 which resulted primarily from the repayment of the lease financing and notes payable, offset against the PPP loan proceeds and line of credit.
As of September 30, 2019, we had $982,311 in cash and cash equivalents compared to $442,098 in cash and cash equivalents as of December 31, 2018. As of December 31, 2018, and September 30, 2019 we had a working capital surplus of $836,786 and $1,529,779, respectively. Stockholders’ equity was valued at $915,305 and $1,023,288 at December 31, 2018 and September 30, 2019, respectively.
Net cash provided by operating activities was $5,123 for the nine months ended September 30, 2019, resulting primarily from the operating changes in accounts receivable, prepaid expenses, operating lease liability. Net cash used in investing activities was a result of the cash paid for the SMW acquisition.
Net cash provided by financing activities for the nine months ended September 30, 2019 was $1,203,723 which resulted primarily from the proceeds received from the Company’s loan payable offset by the repayment of the line of credit and lease financing.
We intend to continue to finance our internal growth with cash on hand, cash provided from operations, borrowings, debt or equity offerings, or some combination thereof. We believe that our cash provided by 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, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes there have been no significant changes during the nine month period ended September 30, 2020 to the items disclosed as critical accounting policies in management’s discussion and analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when we deem it necessary.
Basis of Accounting
The accompanying financial statements have been prepared using the accrual basis of accounting.
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Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods presented. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers deposits that can be redeemed on demand and investments that have original maturities of less than three months, when purchased, to be cash equivalents. As of September 30, 2020 and December 31, 2019, the Company’s cash and cash equivalents were deposited in two financial institutions.
Accounts Receivable
Trade accounts receivable are recorded at the net invoice value and are not interest bearing.
The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience and a review of the current status of accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change in the future. An allowance of $0 has been recorded at September 30, 2020 and December 31, 2019, respectively.
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.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements.
Property and equipment are depreciated as follows:
| Description |
| Useful Life |
| Method |
| Office equipment |
| 7 years |
| Straight-line |
| Machinery and equipment |
| 5 to 7 years |
| Straight-line |
| Computer equipment |
| 3 to 7 years |
| Straight-line |
| Vehicles |
| 5 years |
| Straight-line |
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Long-lived assets
Long lived assets, such as property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Circumstances which could trigger a review include, but are not limited to; significant decrease in the market price of the asset; significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount of fair value less costs to sell and would no longer be depreciated. The depreciable basis of assets that are impaired and continue in use is their respective fair values.
Goodwill and Intangible Assets
Intangibles assets include goodwill, trademarks, intellectual property and customer base acquired through the asset purchase of Specialty Microwave. The Company accounts for Other Intangible Assets under the guidance of ASC 350, “Intangibles-Goodwill and Other.” Under the guidance, other intangible assets with definite lives are amortized over their estimated useful lives Intangible assets with indefinite lives are tested annually for impairment. Goodwill is not amortized. We test goodwill balances for impairment annually at December 31 or whenever impairment indicators arise.
Leases
On January 1, 2019, we adopted ASU No. 2016-02, “Leases (Topic 842),” which requires leases with durations greater than twelve months to be recognized on the balance sheet. We adopted this standard using the modified retrospective approach with an effective date as of the beginning of January 2019. Prior year financial statements were not restated under the new standard. We lease property and equipment under finance and operating leases. For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the lease term. 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.
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.
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Determine the transaction price. Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns, rebates, discounts, and other adjustments. The estimates of variable consideration are based on historical payment experience, historical and projected sales data, and current contract terms. Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.
Allocate the transaction price to performance obligations in the contract. We typically do not have multiple performance obligations in our contracts with customers. As such, we generally recognize revenue upon transfer of the product to the customer’s control at contractually stated pricing.
Recognize revenue when or as we satisfy a performance obligation. We generally satisfy performance obligations at a point in time upon either shipment or delivery of goods, in accordance with the terms of each contract with the customer. We do not have significant
service revenue.
Reserves are recorded as a reduction in net sales and are not considered material to our consolidated statements of income for the years ended December 31, 2019 and 2018.
Research and Development
Research and development expenditures are charged to operations as incurred. The major components of research and development costs include consultants, outside service, and supplies.
Research and development costs for the nine months ended September 30, 2020 and 2019 were $41,083 and $48,262.
Income Taxes
The Company’s deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of certain assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At September 30, 2020 and December 31, 2019, 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.
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Fair Value of Assets and Liabilities
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorizing within fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined in the following categories:
Level 1. Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Cash and cash equivalents are valued using inputs in Level 1.
Level 2. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3. Inputs that are both significant to the fair value measurement and unobservable. These inputs rely on management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. The unobservable inputs are developed based on the best information available in the circumstances and may include the Company’s own data.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employees required service period, which is generally the vesting period.
Off Balance Sheet Transactions
As of September 30, 2020, we did not have any off-balance sheet arrangements.
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MANAGEMENT AND BOARD OF DIRECTORS
Executive Officers and Directors
Our executive officers and directors are as follows:
| Name |
| Age |
| Position |
|
| ||||
| Fawad Maqbool (1) |
| 59 |
| Chairman, President, Chief Executive Officer, and Treasurer and a Director |
|
| ||||
| Louisa Sanfratello (2) |
| 54 |
| Chief Financial Officer and Secretary, Director |
| (1) | Mr. Maqbool was appointed as our Chairman, President, Chief Executive Officer, Treasurer and Secretary on August 13, 2012 upon the closing of the Share Exchange. On August 22, 2012, Mr. Maqbool resigned as the Company’s Secretary. |
|
| |
| (2) | Ms. Sanfratello was appointed as our Chief Financial Officer on August 13, 2012 upon the closing of the Share Exchange. On August 22, 2012, Ms. Sanfratello was appointed as the Company’s Secretary. |
No members of our Board of Directors are independent using the definition of independence under Nasdaq Listing Rule 5605(a)(2) and the standards established by the SEC. Prior to closing the offering we plan to increase the size the Board of Directors to satisfy Nasdaq’s requirement that the majority of the Board of Directors be independent.
A brief description of the background and business experience of our executive officers and directors for the past five years is as follows:
Fawad Maqbool, age 59, has served as the President, Chief Executive Officer and Chairman of the Board of Directors since founding Amplitech, Inc. 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 54, 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 invaluable 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.
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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.
Board Committees
We have not formed an Audit Committee, Compensation Committee or Nominating and Corporate Governance Committee as of the filing of this registration statement. Our Board of Directors currently performs the principal functions of an Audit Committee. We currently do not have an audit committee financial expert on our Board of Directors. We believe that an audit committee financial expert is not required because the cost of hiring an audit committee financial expert to act as one of our directors and to be a member of an Audit Committee outweighs the benefits of having an audit committee financial expert at this time.
The Company plans to appoint three additional independent directors to serve on our board of directors and as chairpersons of the following committees, which we intend to form prior to this offering:
|
| · | Audit Committee |
|
|
|
|
|
| · | Compensation Committee |
|
|
|
|
|
| · | Nominating Committee |
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.
Code of Ethics
We currently do not have a code of ethics that applies to our officers, employees and director, including our Chief Executive Officer, however, we are in the process of formulating a code of ethics and intend to adopt one in the near future.
EXECUTIVE AND DIRECTOR COMPENSATION
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, 2019 and 2018:
Summary Compensation of Named Executive Officers
| Name and Principal Position |
| Fiscal Year |
| Salary ($) |
|
| Bonus ($) |
|
| Stock Awards ($) |
|
| All Other Compensation ($) |
|
| Total ($) |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
| Fawad Maqbool |
| 2019 |
|
| 212,384 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 212,384 |
|
| Chairman, President and Chief Executive Officer |
| 2018 |
|
| 167,308 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 167,308 |
|
| Louisa Sanfratello |
| 2019 |
|
| 101,463 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 101,463 |
|
| Chief Financial Officer, Secretary |
| 2018 |
|
| 74,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 74,000 |
|
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| Table of Contents |
Outstanding Equity Awards at Fiscal Year End
Except as indicated in the above table, none of our executive officers received any equity awards, including, options, restricted stock or other equity incentives during the fiscal year ended December 31, 2019 and 2018.
Compensation of Our President and Chief Executive Officer
Fawad Maqbool, has authority and discretion to determine his own compensation for serving as the Company’s President and Chief Executive Officer.
Compensation of Directors
During the year ended December 31, 2019, our former director Wayne Homschek received $45,000 in compensation. In April 2019 we issued him a warrant exercisable for 3,000,000 shares of common stock at an exercise price of $0.03 per share. 1,500,000 shares of common stock underlying the warrant vested six months after issuance and the remaining balance of 1,500,000 shares vested one year after issuance. Subsequent to the fiscal year ended December 31, 2019, Mr. Homschek exercised his warrant for 3,000,000 shares of common stock and it is no longer outstanding.
During the year ended December 31, 2018, none of the directors received any compensation solely for the service as director.
2020 Equity Incentive Plan
In October 2020, the Board of Directors and shareholders adopted the Company’s 2020 Equity Incentive Plan (the “2020 Plan”), effective as of December 14, 2020. Under the 2020 Plan, the Company will reserve 25,000,000 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.
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| Table of Contents |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no transactions since the beginning of the fiscal year of 2018, 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”).
Related Person Transaction Policy
Prior to this offering, we have not had a formal policy regarding approval of transactions with related parties. We expect to adopt a related person transaction policy that sets forth our procedures for the identification, review, consideration and approval or ratification of related person transactions. For purposes of our policy only, a related person transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we and any related person are, were or will be participants in which the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end. Transactions involving compensation for services provided to us as an employee or director are not covered by this policy. A related person is any executive officer, director or beneficial owner of more than 5% of any class of our voting securities, including any of their immediate family members and any entity owned or controlled by such persons.
Under the policy, if a transaction has been identified as a related person transaction, including any transaction that was not a related person transaction when originally consummated or any transaction that was not initially identified as a related person transaction prior to consummation, our management must present information regarding the related person transaction to our audit committee, or, if audit committee approval would be inappropriate, to another independent body of our Board of Directors, for review, consideration and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction and whether the transaction is on terms that are comparable to the terms available to or from, as the case may be, an unrelated third party or to or from employees generally. Under the policy, we will collect information that we deem reasonably necessary from each director, executive officer and, to the extent feasible, significant stockholder to enable us to identify any existing or potential related-person transactions and to effectuate the terms of the policy. In addition, under our code of business conduct and ethics, our employees and directors will have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest. In considering related person transactions, our audit committee, or other independent body of our Board of Directors, will take into account the relevant available facts and circumstances including, but not limited to:
|
| · | the risks, costs and benefits to us; |
|
|
|
|
|
| · | the impact on a director’s independence in the event that the related person is a director, immediate family member of a director or an entity with which a director is affiliated; |
|
|
|
|
|
| · | the availability of other sources for comparable services or products; and |
|
|
|
|
|
| · | the terms available to or from, as the case may be, unrelated third parties or to or from employees generally. |
The policy requires that, in determining whether to approve, ratify or reject a related person transaction, our audit committee, or other independent body of our Board of Directors, must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, our best interests and those of our stockholders, as our audit committee, or other independent body of our Board of Directors, determines in the good faith exercise of its discretion.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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 December 10, 2020. 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 620 Johnson Avenue, Bohemia, NY 11716.
|
|
| 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, (2) Chairman, President, and Chief Executive Officer |
|
| 51,880,280 |
|
|
| 56.58 | % |
|
|
|
|
|
|
|
|
|
|
| Louisa Sanfratello, Chief Financial Officer |
|
| 200,000 |
|
| * | % | |
|
|
|
|
|
|
|
|
|
|
| All officers and directors as a group (2 persons) |
|
| 52,080,280 |
|
|
| 56.80 | % |
|
|
|
|
|
|
|
|
|
|
| 5% Security Holders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Microphase Corporation |
|
| 5,827,488 |
|
|
| 11.30 | % |
* Less than 1.0%
| (1) | Based on 51,588,958 shares of common stock issued and outstanding.
|
| (2) | Includes (i) 1,000 shares of Series A Convertible Preferred Stock as converted to common stock and (ii) an option to purchase 400,000 shares of Series A Preferred Stock as exercised and converted to common stock. Each share of Series A is convertible into 100 shares of common stock at any time after issuance and the holder of each share of Series A is entitled to 100 votes when the vote of holders of the Company’s common stock is sought. |
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| Table of Contents |
We are offering Units in this offering at an assumed initial offering price of $ ___ per unit. Each Unit consists of one share of our common stock and one warrant to purchase one share of our common stock at an exercise price equal to $ , which is 100% of the assumed public offering price of the Units (each a “Warrant” and together, the “Warrants”). Our Units will not be certificated and the shares of our common stock and the Warrants part of such Units are immediately separable and will be issued separately in this offering. We are also registering the shares of common stock issuable upon exercise of the Warrants. These securities are being issued pursuant to an underwriting agreement between us and the underwriter. You should review the underwriting agreement and the form of Warrant, each filed as exhibits to the registration statement of which this prospectus is a part, for a complete description of the terms and conditions applicable to the Warrants.
Our authorized capital stock consists of 500,000,000 shares of common stock, $0.001 par value per share, and 1,000,000 shares of blank check preferred stock, $0.001 par value per share. As of December 10, 2020, there are 51,588,958 shares of common stock outstanding, 1,000 shares of Series A Convertible Preferred Stock outstanding, convertible into 100,000 shares of common stock, and options to purchase 400,000 shares of Series A Convertible Preferred Stock outstanding, convertible into 40,000,000 shares of common stock, if exercised. Assuming the exercise of all options to purchase shares of our preferred stock and conversion of all of our preferred stock, as of December 10, 2020, we would have had outstanding, an aggregate of 91,688,958 shares of common stock, consisting of (i) 51,588,958 shares of common stock outstanding on such date and (ii) 40,100,000 shares of common stock into which all of our preferred stock outstanding as of such date would have been converted, which were held of record by Fawad Maqbool, our Chairman, President, and Chief Executive Officer.
This description is intended as a summary, and is qualified in its entirety by reference to our amended and restated articles of incorporation and amended and restated by-laws, which are filed, or incorporated by reference, as exhibits to the registration statement of which this prospectus forms a part.
Common Stock
Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders, and do not have cumulative voting rights. Subject to preferences that may be applicable to any outstanding shares of preferred stock, holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by our Board of Directors out of funds legally available for dividend payments. All outstanding, shares of common stock are fully paid and nonassessable, and the shares of common stock to be issued upon completion of this offering will be fully paid and nonassessable. The holders of common stock have no preferences or rights of cumulative voting, conversion, or pre-emptive or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. In the event of any liquidation, dissolution or winding-up of our affairs, holders of common stock will be entitled to share ratably in any of our assets remaining after payment or provision for payment of all of our debts and obligations and after liquidation payments to holders of outstanding shares of preferred stock, if any.
Warrants
Overview. The following summary of certain terms and provisions of the Warrants offered hereby is not complete and is subject to, and qualified in its entirety by, the provisions of the warrant agent agreement between us the Warrant Agent, and the form of Warrant, both of which are filed as exhibits to the registration statement of which this prospectus is a part. Prospective investors should carefully review the terms and provisions set forth in the warrant agent agreement, including the annexes thereto, and form of Warrant.
The Warrants issued in this offering entitle the registered holder to purchase one share of our common stock at a price equal to $ per share (based on an assumed offering price of $ per Unit), subject to adjustment as discussed below, immediately following the issuance of such warrant and terminating at 5:00 p.m., New York City time, five years after the closing of this offering. As described below, we plan to apply to list the Warrants on the Nasdaq Capital Market under the symbol “AMPGW.”
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The exercise price and number of shares of common stock issuable upon exercise of the Warrants may be adjusted in certain circumstances, including in the event of a stock dividend or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances of common stock at prices below its exercise price.
Exercisability. The Warrants are exercisable at any time after their original issuance and at any time up to the date that is five (5) years after their original issuance. The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the Warrant Agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified or official bank check payable to us, for the number of Warrants being exercised. Under the terms of the Warrant Agreement, we must use our best efforts to maintain the effectiveness of the registration statement and current prospectus relating to common stock issuable upon exercise of the Warrants until the expiration of the Warrants. If we fail to maintain the effectiveness of the registration statement and current prospectus relating to the common stock issuable upon exercise of the Warrants, the holders of the Warrants shall have the right to exercise the Warrants solely via a cashless exercise feature provided for in the Warrants, until such time as there is an effective registration statement and current prospectus.
Exercise Limitation. A holder may not exercise any portion of a Warrant to the extent that the holder, together with its affiliates and any other person or entity acting as a group, would own more than 4.99% of the outstanding common stock after exercise, as such percentage ownership is determined in accordance with the terms of the Warrant, except that upon prior notice from the holder to us, the holder may waive such limitation up to a percentage not in excess of 9.99%.
Exercise Price. The exercise price per whole share of common stock purchasable upon exercise of the Warrants is $ per share (based on an assumed public offering price of $ per Unit) or 100% of public offering price of the common stock. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock and also upon any distributions of assets, including cash, stock or other property to our stockholders.
Fractional Shares. No fractional shares of common stock will be issued upon exercise of the Warrants. If, upon exercise of the Warrant, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, pay a cash adjustment in respect of such fraction in an amount equal to such fraction multiplied by the exercise price. If multiple Warrants are exercised by the holder at the same time, we shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the exercise price.
Transferability. Subject to applicable laws, the Warrants may be offered for sale, sold, transferred or assigned without our consent.
Exchange Listing. We have applied to list our Warrants on the Nasdaq Capital Market under the symbol “AMPGW.” No assurance can be given that our listing application will be approved.
Warrant Agent; Global Certificate. The Warrants will be issued in registered form under a warrant agent agreement between the Warrant Agent and us. The warrants shall initially be represented only by one or more global warrants deposited with the Warrant Agent, as custodian on behalf of The Depository Trust Company (DTC) and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.
Fundamental Transactions. In the event of a fundamental transaction, as described in the Warrants and generally including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, the holders of the Warrants will be entitled to receive the kind and amount of securities, cash or other property that the holders would have received had they exercised the warrants immediately prior to such fundamental transaction.
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Rights as a Stockholder. The Warrant holders do not have the rights or privileges of holders of common stock or any voting rights until they exercise their Warrants and receive shares of common stock. After the issuance of shares of common stock upon exercise of the Warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
Governing Law. The Warrants and the warrant agent agreement are governed by New York law.
Underwriter’s Warrants. The registration statement of which this prospectus is a part also registers for sale the Underwriter’s Warrants, as a portion of the underwriting compensation in connection with this offering. The Underwriter’s Warrants will be exercisable for a four and one-half year period commencing 180 days following the effective date of the registration statement of which this prospectus is a part at an exercise price of $ (110% of the assumed public offering price of the Units). Please see “Underwriting—Underwriter’s Warrants” for a description of the warrants we have agreed to issue to the underwriter in this offering, subject to the completion of the offering.
Preferred Stock
On July 10, 2013, the Board of Directors of the Company approved a certificate of amendment to the articles of incorporation and changed the authorized capital stock of the Company to include and authorize 500,000 shares of Preferred Stock, par value $0.001 per share. The current amended and restated certificate authorizes the Company to issue 1,000,000 shares of Preferred Stock.
In July 2013, the Board of Directors of the Company designated 140,000 shares Series A Convertible Preferred Stock. In January 2015, the Board of Directors of the Company increased the number of Series A Convertible Preferred Stock designated from 140,000 to 401,000. On October 7, 2020, our Board of Directors and our stockholders approved a resolution to amend and restate the certificate of designation of preferences, rights and limitations of Series A Convertible Preferred Stock to restate that there are 401,000 shares of the Company’s blank check Preferred Stock designated as Series A Convertible Preferred Stock. The amended and restated certificate clarifies that the Series A Convertible Preferred Stock convert at a rate of one hundred 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. There are currently 1,000 shares of Series A Convertible Preferred Stock outstanding held by Fawad Maqbool, our Chairman, President, and Chief Executive Officer.
On October 7, 2020, the Board of Directors of the Company approved a resolution to withdraw the Series B Preferred Stock designation by filing a certificate of withdrawal. Our Board of Directors took this action to remove the Series B Preferred Stock designation from any of its blank check Preferred Stock. At the time of withdrawal, there were no holders of the Series B Preferred Stock and the Company had no plans to issue Series B Preferred Stock.
Our Board of Directors has the authority, without further stockholder authorization, to issue from time to time shares of preferred stock in one or more series and to fix the terms, limitations, relative rights and preferences and variations of each series. Although we have no present plans to issue additional shares of preferred stock, the issuance of shares of preferred stock, or the issuance of rights to purchase such shares, could decrease the amount of earnings and assets available for distribution to the holders of common stock, could adversely affect the rights and powers, including voting rights, of the common stock, and could have the effect of delaying, deterring or preventing a change of control of us or an unsolicited acquisition proposal.
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Nevada Anti-Takeover Statutes
The following provisions of the Nevada Revised Statutes (“NRS”) could, if applicable, have the effect of discouraging takeovers of our company.
Transactions with Interested Stockholders. The NRS prohibits a publicly-traded Nevada company from engaging in any business combination with an interested stockholder for a period of three years following the date that the stockholder became an interested stockholder unless, prior to that date, the Board of Directors of the corporation approved either the business combination itself or the transaction that resulted in the stockholder becoming an interested stockholder.
An “interested stockholder” is defined as any entity or person beneficially owning, directly or indirectly, 10% or more of the outstanding voting stock of the corporation and any entity or person affiliated with, controlling, or controlled by any of these entities or persons. The definition of “business combination” is sufficiently broad to cover virtually any type of transaction that would allow a potential acquirer to use the corporation’s assets to finance the acquisition or otherwise benefit its own interests rather than the interests of the corporation and its stockholders.
In addition, business combinations that are not approved and therefore take place after the three year waiting period may also be prohibited unless approved by the board of directors and stockholders or the price to be paid by the interested stockholder is equal to the highest of (i) the highest price per share paid by the interested stockholder within the 3 years immediately preceding the date of the announcement of the business combination or in the transaction in which he or she became an interested stockholder, whichever is higher; (ii) the market value per common share on the date of announcement of the business combination or the date the interested stockholder acquired the shares, whichever is higher; or (iii) if higher for the holders of preferred stock, the highest liquidation value of the preferred stock.
Acquisition of a Controlling Interest. The NRS contains provisions governing the acquisition of a “controlling interest” and provides generally that any person that acquires 20% or more of the outstanding voting shares of an “issuing corporation,” defined as Nevada corporation that has 200 or more stockholders at least 100 of whom are Nevada residents (as set forth in the corporation’s stock ledger); and does business in Nevada directly or through an affiliated corporation, may be denied voting rights with respect to the acquired shares, unless a majority of the disinterested stockholder of the corporation elects to restore such voting rights in whole or in part.
The statute focuses on the acquisition of a “controlling interest” defined as the ownership of outstanding shares sufficient, but for the control share law, to enable the acquiring person, directly or indirectly and individually or in association with others, to exercise (i) one-fifth or more, but less than one-third; (ii) one-third or more, but less than a majority; or (iii) a majority or more of the voting power of the corporation in the election of directors.
The question of whether or not to confer voting rights may only be considered once by the stockholders and once a decision is made, it cannot be revisited. In addition, unless a corporation’s articles of incorporation or bylaws provide otherwise (i) acquired voting securities are redeemable in whole or in part by the issuing corporation at the average price paid for the securities within 30 days if the acquiring person has not given a timely information statement to the issuing corporation or if the stockholders vote not to grant voting rights to the acquiring person’s securities; and (ii) if voting rights are granted to the acquiring person, then any stockholder who voted against the grant of voting rights may demand purchase from the issuing corporation, at fair value, of all or any portion of their securities.
The provisions of this section do not apply to acquisitions made pursuant to the laws of descent and distribution, the enforcement of a judgment, or the satisfaction of a security interest, or acquisitions made in connection with certain mergers or reorganizations.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Manhattan Transfer Registrar Co. [Our transfer agent will also be the Warrant Agent.]
Reverse Stock Split
On December 7, 2020, our stockholders approved a reverse stock split within the range of 1-for-20 to 1-for-200 of our issued and outstanding shares of common stock and authorized the Board, in its discretion to determine the final ratio and effective date in connection with the reverse stock split. The reverse stock split will not impact the number of authorized shares of common stock which will remain at 500,000,000 shares. The share and per share information in this prospectus do not reflect the proposed reverse stock split of the issued and outstanding shares of our common stock to occur on or immediately following the effective date of the registration statement of which this prospectus forms a part. This prospectus will be amended by an amendment to this registration statement to reflect the reverse stock split ratio and the effect of such reverse stock split.
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Maxim Group LLC is acting as the underwriter of the offering (the “underwriter”). We have entered into an underwriting agreement dated , 2020 with the Representative. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to each underwriter named below and each underwriter named below has severally and not jointly agreed to purchase from us, at the public offering price per Unit less the underwriting discounts set forth on the cover page of this prospectus, the number of Units listed next to its name in the following table:
| Underwriter |
| Number |
| |
| Maxim Group LLC |
|
|
|
|
| Total |
|
|
|
|
The underwriting agreement provides that the obligation of the underwriter to purchase all of the Units being offered to the public is subject to specific conditions, including the absence of any material adverse change in our business or in the financial markets and the receipt of certain legal opinions, certificates and letters from us, our counsel and the independent auditors. The underwriting agreement also provides that if an underwriter defaults, the offering may be terminated. Subject to the terms of the underwriting agreement, the underwriter will purchase all of the Units being offered to the public, other than those covered by the over-allotment option described below, if any of these Units are purchased.
The underwriter is offering the Units, subject to prior sale, when, as and if issued to and accepted by it, subject to approval of legal matters by their counsel and other conditions specified in the underwriting agreement. The underwriter reserves the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
Over-Allotment Option
We have granted to the underwriter an option, exercisable one or more times in whole or in part, not later than 45 days after the date of this prospectus, to purchase from us up to an (i) additional shares of common stock at a price of $ per share and/or (ii) additional warrants to purchase shares of common stock at a price of $ per warrant (15% of the shares of common stock and warrants included in the Units sold in this offering), in each case, less the underwriting discounts and commissions set forth on the cover of this prospectus in any combination thereof to cover over-allotments, if any. To the extent that the underwriter exercises this option, it will become obligated, subject to conditions, to purchase approximately the same percentage of these additional shares of common stock and/or warrants as the number of Units to be purchased by it in the above table bears to the total number of Units offered by this prospectus. We will be obligated, pursuant to the option, to sell these additional shares of common stock and/or warrants to the underwriter to the extent the option is exercised. If any additional shares of common stock and/or warrants are purchased, the underwriter will offer the additional shares of common stock and/or warrants on the same terms as those on which the other Units are being offered hereunder. If this option is exercised in full, the total offering price to the public will be $ and the total net proceeds, before expenses and after the credit to the underwriting commissions and corporate finance fee described below, to us will be $ .
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| Table of Contents |
Discounts and Commissions; Expenses
The following table shows the public offering price, underwriting discount and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriter of the over-allotment option.
|
|
| Per Unit |
|
| Total Without Over- Allotment Option |
|
| Total With Full Over- Allotment Option |
| |||
| Public offering price |
| $ |
|
| $ |
|
| $ |
| |||
| Underwriting discount (7.5%) |
| $ |
|
| $ |
|
| $ |
| |||
| Proceeds, before expenses, to us |
| $ |
|
| $ |
|
| $ |
| |||
The underwriter proposes to offer the Units offered by us to the public at the public offering price per Unit set forth on the cover of this prospectus. In addition, the underwriter may offer some of the Units to other securities dealers at such price less a concession of $ per Unit. After the initial offering, the public offering price and concession to dealers may be changed.
We have paid an advance of $5,000 to the underwriter, which will be applied against the accountable expenses that will be paid by us to the underwriter in connection with this offering. The $5,000 advance will be returned to us to the extent not actually incurred. The underwriting agreement also provides that in the event the offering is terminated, the $5,000 expense deposit paid to the underwriter will be returned to us to the extent that offering expenses are not actually incurred by the underwriter in accordance with Financial Industry Regulation Authority (“FINRA”) Rule 5110(f)(2)(C).
We have also agreed to reimburse the underwriter for reasonable out-of-pocket expenses not to exceed $100,000 in the aggregate if there is a closing of this offering, or up to $40,000 in the event there is not a closing. We estimate that total expenses payable by us in connection with this offering, other than the underwriting discount and corporate finance fee, will be approximately $ .
Discretionary Accounts
The underwriter does not intend to confirm sales of the Units offered hereby to any accounts over which it has discretionary authority.
Indemnification
We have agreed to indemnify the underwriter against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriter may be required to make in respect thereof.
Lock-Up Agreements
We and our officers and directors, [and the holders of 1% or more of the outstanding shares of our common stock, as of the effective date of the Registration Statement,] have agreed, subject to limited exceptions, for a period of 180 days after the closing of this offering, not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of, directly or indirectly any shares of our common stock or any securities convertible into or exchangeable for our common stock either owned as of the date of the underwriting agreement or thereafter acquired without the prior written consent of the underwriter. The underwriter may, in its sole discretion and at any time or from time to time before the termination of the lock-up period, without notice, release all or any portion of the securities subject to lock-up agreements.
Pricing of this Offering
Prior to this offering, there has not been an active market for our common stock and there has been no public market for our warrants. The public offering price for our Units will be determined through negotiations between us and the underwriter. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the underwriter believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant.
| 52 |
| Table of Contents |
We offer no assurances that the public offering price of our Units will correspond to the price at which our common stock will trade in the public market subsequent to this offering or that an active trading market for our common stock and warrants will develop and continue after this offering.
Underwriter’s Warrants
We have agreed to issue to the underwriter (or its permitted assignees) warrants to purchase up to a total of shares of common stock (6% of the shares of common stock included in the Units, excluding the over-allotment, if any). The warrants will be exercisable at any time, and from time to time, in whole or in part, during the three year period commencing 180 days from the effective date of the registration statement of which this prospectus is a part, which period is in compliance with FINRA Rule 5110(f)(2)(G)(i). The warrants are exercisable at a per share price equal to $ per share, or 110% of the public offering price per Unit in the offering (based on the assumed public offering price of $ per Unit). The warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The underwriter (or permitted assignees under Rule 5110(g)(1)) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the effective date of the registration statement of which this prospectus is a part. In addition, the warrants provide for certain piggyback registration rights. The piggyback registration rights provided will not be greater than years from the effective date of the registration statement of which this prospectus is a part in compliance with FINRA Rule 5110(f)(2)(G)(v). We will bear all fees and expenses attendant to registering the securities issuable on exercise of the Underwriter’s warrants. The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary cash dividend or our recapitalization, reorganization, merger or consolidation. However, the warrant exercise price or underlying shares will not be adjusted for issuances of shares of common stock at a price below the warrant exercise price.
Right of First Refusal and Certain Post-Offering Investments
Subject to the closing of this offering and certain conditions set forth in the underwriting agreement, for a period of twelve (12) months after the closing of the offering, the underwriter shall have a right of first refusal to act as lead managing underwriter and book-runner and/or placement agent for any and all future public or private equity, equity-linked or debt (excluding commercial bank debt) offerings undertaken during such period by us, or any of our successors or subsidiaries, on terms customary to each of the underwriter. The underwriter, in conjunction with us, shall have the sole right to determine whether or not any other broker-dealer shall have the right to participate in any such offering and the economic terms of any such participation.
Trading; Nasdaq Capital Market Listing
Our common stock is presently quoted on the OTCQB market under the symbol “AMPG.” We have applied to list our common stock and the warrants offered in the offering on the Nasdaq Capital Market under the symbols “AMPG” and “AMPGW,” respectively. No assurance can be given that our listing application will be approved by the Nasdaq Capital Market.
Price Stabilization, Short Positions and Penalty Bids
In connection with this offering the underwriter may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act:
|
| • | Stabilizing transactions permit bids to purchase securities so long as the stabilizing bids do not exceed a specified maximum. |
|
| • | Over-allotment involves sales by the underwriter of securities in excess of the number of securities the underwriter is obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of securities over-allotted by the underwriter is not greater than the number of securities that they may purchase in the over-allotment option. In a naked short position, the number of securities involved is greater than the number of securities in the over-allotment option. The underwriter may close out any covered short position by either exercising its over-allotment option and/or purchasing securities in the open market. |
| 53 |
| Table of Contents |
|
| • | Syndicate covering transactions involve purchases of the securities in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of securities to close out the short position, the underwriter will consider, among other things, the price of securities available for purchase in the open market as compared to the price at which they may purchase securities through the over-allotment option. A naked short position occurs if the underwriter sells more securities than could be covered by the over-allotment option. This position can only be closed out by buying securities in the open market. A naked short position is more likely to be created if the underwriter is concerned that there could be downward pressure on the price of the securities in the open market after pricing that could adversely affect investors who purchase in this offering. |
|
| • | Penalty bids permit the underwriter to reclaim a selling concession from a syndicate member when securities originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. |
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our securities or preventing or retarding a decline in the market price of the securities. As a result, the price of our shares of common stock and warrants may be higher than the price that might otherwise exist in the open market. These transactions may be discontinued at any time.
Neither we nor the underwriter make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our shares of common stock and warrants. In addition, neither we nor the underwriter make any representation that the underwriter will engage in these transactions or that any transaction, if commenced, will not be discontinued without notice.
Electronic Distribution
This prospectus in electronic format may be made available on websites or through other online services maintained by the underwriter, or by their affiliates. Other than this prospectus in electronic format, the information on the underwriter’s website and any information contained in any other websites maintained by the underwriter is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the underwriter in its capacity as underwriter, and should not be relied upon by investors.
Other
From time to time, the underwriter and/or its affiliates have provided, and may in the future provide, various investment banking and other financial services for us for which services it has received and, may in the future receive, customary fees. Except for the services provided in connection with this offering and other than as described below, the underwriter has not provided any investment banking or other financial services during the 180-day period preceding the date of this prospectus.
On October 15, 2019 we engaged Maxim Group LLC as our financial advisor, for which it received compensation consisting of 550,000 shares of common stock issued on October 15, 2019 and 450,000 shares of common stock issued on April 15, 2020. At the closing of this offering, we are obligated to issue to Maxim or its designees 1,000,000 shares of common stock for their past advisory services.
| 54 |
| Table of Contents |
Offers Outside the United States
Other than in the United States, no action has been taken by us or the underwriter that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Certain legal matters in connection with the securities offered by this prospectus have been passed upon for the Company by Sichenzia Ross Ference LLP, New York, New York. Harter Secrest & Emery LLP is acting as counsel for the underwriter in this offering.
Our financial statements as of December 31, 2019 and December 31, 2018 have been included in reliance on the report of Sadler, Gibb & Associates, LLC, an independent registered public accounting firm, as stated in its report incorporated by reference herein, and have been so incorporated in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act, with respect to the shares of common stock being offered by this prospectus. This prospectus does not contain all of the information in the registration statement and its exhibits. For further information with respect to us and the common stock offered by this prospectus, we refer you to the registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference. All filings we make with the SEC are available on the SEC’s web site at www.sec.gov.
We are subject to the periodic reporting requirements of the Exchange Act, and we will file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information are available on the website of the SEC referred to above. We maintain a website at www.amplitechinc.com. You may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge or at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We have not incorporated by reference into this prospectus the information contained in, or that can be accessed through, our website, and you should not consider it to be a part of this prospectus.
| 55 |
| Table of Contents |
CONSOLIDATED FINANCIAL STATEMENTS
Index to Consolidated Financial Statements
Condensed
|
|
| Page |
| |
| Audited Financial Statements For the Years Ended December 31, 2019 and 2018 |
|
|
| |
|
|
| F-2 |
| |
|
| F-3 |
| ||
|
| F-4 |
| ||
|
| F-5 |
| ||
|
| F-6 |
| ||
|
| F-7 |
| ||
| Unaudited Interim Condensed Consolidated Financial Statements for the Three and Nine-Month Periods Ended September 30, 2020 |
|
|
| |
|
|
| F-28 |
| |
|
| F-29 |
| ||
|
| F-30 |
| ||
|
| F-31 |
| ||
|
| F-32 |
|
| F-1 |
| Table of Contents |
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, 2019 and 2018, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2019 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, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, 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 provides a reasonable basis for our opinion.
/s/ Sadler, Gibb & Associates, LLC
We have served as the Company’s auditor since 2013.
Salt Lake City, UT
March 25, 2020
| F-2 |
| Table of Contents |
Consolidated Balance Sheets
|
|
| December 31, |
|
| December 31, |
| ||
|
|
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
|
| ||
| Assets |
|
|
|
|
|
| ||
| Current Assets |
|
|
|
|
|
| ||
| Cash and cash equivalents |
| $ | 574,712 |
|
| $ | 442,098 |
|
| Accounts receivable |
|
| 619,195 |
|
|
| 262,002 |
|
| Inventories, net |
|
| 557,710 |
|
|
| 391,188 |
|
| Prepaid expenses |
|
| 124,209 |
|
|
| 120,100 |
|
| Total Current Assets |
|
| 1,875,826 |
|
|
| 1,215,388 |
|
|
|
|
|
|
|
|
|
|
|
| Property and equipment, net |
|
| 198,110 |
|
|
| 180,745 |
|
| Right of use operating lease assets |
|
| 465,092 |
|
|
| - |
|
| Intangible assets, net |
|
| 673,429 |
|
|
| - |
|
| Goodwill |
|
| 120,136 |
|
|
|
|
|
| Security deposits |
|
| 27,821 |
|
|
| 11,707 |
|
|
|
|
|
|
|
|
|
|
|
| Total Assets |
| $ | 3,360,414 |
|
| $ | 1,407,840 |
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
| Current Liabilities |
|
|
|
|
|
|
|
|
| Accounts payable and accrued expenses |
|
| 154,507 |
|
| $ | 86,125 |
|
| Customer deposits |
|
| 35,680 |
|
|
| 190,400 |
|
| Current portion of financing lease |
|
| 30,556 |
|
|
| 29,180 |
|
| Current portion of operating lease |
|
| 130,628 |
|
|
| - |
|
| Current portion of notes payable |
|
| 169,697 |
|
|
| - |
|
| Line of credit |
|
| - |
|
|
| 72,897 |
|
| Total Current Liabilities |
|
| 521,068 |
|
|
| 378,602 |
|
|
|
|
|
|
|
|
|
|
|
| Long Term Liabilities |
|
|
|
|
|
|
|
|
| Finance lease, net of current portion |
|
| 83,376 |
|
|
| 113,933 |
|
| Operating lease, net of current portion |
|
| 338,344 |
|
|
| - |
|
| Notes payable, net of current portion |
|
| 1,323,953 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Total Liabilities |
|
| 2,266,741 |
|
|
| 492,535 |
|
|
|
|
|
|
|
|
|
|
|
| Commitments and Contingencies |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Stockholders' Equity |
|
|
|
|
|
|
|
|
| Series A convertible preferred stock, par value $0.001, 401,000 shares authorized, 1,000 shares issued and outstanding, respectively |
|
| 1 |
|
|
| 1 |
|
| Series B convertible preferred stock, par value $0.001, 75,000 shares authorized, 0 shares issued and outstanding, respectively |
|
| - |
|
|
| - |
|
| Common Stock, par value $0.001, 500,000,000 shares authorized, 49,086,326 and 48,336,326 shares issued and outstanding, respectively |
|
| 49,086 |
|
|
| 48,336 |
|
| Common stock payable |
|
| 24,480 |
|
|
| - |
|
| Additional paid-in capital |
|
| 1,862,919 |
|
|
| 1,715,726 |
|
| Accumulated deficit |
|
| (842,813 | ) |
|
| (848,758 | ) |
|
|
|
|
|
|
|
|
|
|
| Total Stockholders' Equity |
|
| 1,093,673 |
|
|
| 915,305 |
|
|
|
|
|
|
|
|
|
|
|
| Total Liabilities and Stockholders' Equity |
| $ | 3,360,414 |
|
| $ | 1,407,840 |
|
See accompanying notes to the consolidated financial statements
| F-3 |
| Table of Contents |
Consolidated Statements of Operations
For The Years Ended December 31, 2019 and 2018
|
|
|
|
|
| ||||
|
|
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
|
| ||
| Revenue |
| $ | 3,122,630 |
|
| $ | 2,397,418 |
|
|
|
|
|
|
|
|
|
|
|
| Cost of goods sold |
|
| 1,556,654 |
|
|
| 1,016,226 |
|
|
|
|
|
|
|
|
|
|
|
| Gross Profit |
|
| 1,565,976 |
|
|
| 1,381,192 |
|
|
|
|
|
|
|
|
|
|
|
| Selling, general and administrative expense |
|
| 1,483,979 |
|
|
| 1,039,768 |
|
|
|
|
|
|
|
|
|
|
|
| Income From Operations |
|
| 81,997 |
|
|
| 341,424 |
|
|
|
|
|
|
|
|
|
|
|
| Other Expenses |
|
|
|
|
|
|
|
|
| Interest expense, net |
|
| (76,052 | ) |
|
| (12,431 | ) |
|
|
|
|
|
|
|
|
|
|
| Income Before Income Taxes |
|
| 5,945 |
|
|
| 328,993 |
|
|
|
|
|
|
|
|
|
|
|
| Provision For Income Taxes |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Net Income |
| $ | 5,945 |
|
| $ | 328,993 |
|
|
|
|
|
|
|
|
|
|
|
| Net Income Per Share; |
|
|
|
|
|
|
|
|
| Basic |
| $ | 0.00 |
|
| $ | 0.00 |
|
| Diluted |
| $ | 0.00 |
|
| $ | 0.00 |
|
|
|
|
|
|
|
|
|
|
|
| Weighted Average Shares Outstanding; |
|
|
|
|
|
|
|
|
| Basic |
|
| 48,593,312 |
|
|
| 47,771,668 |
|
| Diluted |
|
| 89,998,615 |
|
|
| 87,674,310 |
|
See accompanying notes to the consolidated financial statements
| F-4 |
| Table of Contents |
Consolidated Statements of Stockholders' Equity
For The Years Ended December 31, 2019 and 2018
|
|
| Series A Convertible Preferred | Common Stock |
|
| Common |
|
| Additional |
|
|
|
| Total |
| |||||||||||||||||
|
|
| Number of |
|
| Par |
|
| Number of |
|
| Par |
|
| Stock |
|
| Paid-In |
|
| Accumulated |
|
| Stockholders' |
| ||||||||
|
|
| Shares |
|
| Value |
|
| Shares |
|
| Value |
|
| Payable |
|
| Capital |
|
| Deficit |
|
| Equity |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
| Balance, December 31, 2017 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 46,136,326 |
|
| $ | 46,136 |
|
| $ | - |
|
| $ | 1,631,976 |
|
| $ | (1,177,751 | ) |
| $ | 500,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock issued for prepaid consulting |
|
| - |
|
|
| - |
|
|
| 2,200,000 |
|
|
| 2,200 |
|
|
| - |
|
|
| 83,750 |
|
|
| - |
|
|
| 85,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income for the year ended December 31, 2018 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 328,993 |
|
|
| 328,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, December 31, 2018 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 48,336,326 |
|
| $ | 48,336 |
|
| $ | - |
|
| $ | 1,715,726 |
|
| $ | (848,758 | ) |
| $ | 915,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock based compensation |
|
| - |
|
|
| - |
|
|
| 750,000 |
|
|
| 750 |
|
|
| - |
|
|
| 147,193 |
|
|
| - |
|
|
| 147,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock payable |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 24,480 |
|
|
| - |
|
|
| - |
|
|
| 24,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income for the year ended December 31, 2019 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5,945 |
|
|
| 5,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, December 31, 2019 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 49,086,326 |
|
| $ | 49,086 |
|
| $ | 24,480 |
|
| $ | 1,862,919 |
|
| $ | (842,813 | ) |
| $ | 1,093,673 |
|
See accompanying notes to the consolidated financial statements
| F-5 |
| Table of Contents |
Consolidated Statements of Cash Flows
For The Years Ended December 31, 2019 and 2018
|
|
| December 31, |
|
| December 31, |
| ||
|
|
| 2019 |
|
| 2018 |
| ||
| Cash Flows from Operating Activities: |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
| Net Income |
| $ | 5,945 |
|
| $ | 328,993 |
|
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
| 53,879 |
|
|
| 38,821 |
|
| Amortization of prepaid consulting |
|
| 65,640 |
|
|
| 37,604 |
|
| Amortization of right-of-use operating lease asset |
|
| 75,558 |
|
|
| - |
|
| Stock based compensation |
|
| 118,023 |
|
|
| - |
|
| Amortization of debt discount |
|
| 24,465 |
|
|
| - |
|
| Changes in Operating Assets and Liabilities: |
|
|
|
|
|
|
|
|
| Accounts receivable |
|
| (357,193 | ) |
|
| (124,537 | ) |
| Inventories |
|
| 135,232 |
|
|
| (55,520 | ) |
| Prepaid expenses |
|
| 42,843 |
|
|
| (57,903 | ) |
| Security deposits |
|
| (16,114 | ) |
|
| (2,954 | ) |
| Accounts payable and accrued expenses |
|
| 65,954 |
|
|
| 28,980 |
|
| Operating lease liability |
|
| (69,250 | ) |
|
| - |
|
| Customer deposits |
|
| (164,997 | ) |
|
| 158,818 |
|
|
|
|
|
|
|
|
|
|
|
| Total Adjustments |
|
| (25,960 | ) |
|
| 23,309 |
|
|
|
|
|
|
|
|
|
|
|
| Net cash (used in) provided by operating activities |
|
| (20,015 | ) |
|
| 352,302 |
|
|
|
|
|
|
|
|
|
|
|
| Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
| Purchase of equipment |
|
| (12,653 | ) |
|
| (10,584 | ) |
| Cash paid in acquisition |
|
| (668,633 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Net cash used in investing activities |
|
| (681,286 | ) |
|
| (10,584 | ) |
|
|
|
|
|
|
|
|
|
|
| Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
| Repayment of line of credit, net |
|
| (72,897 | ) |
|
| (3,538 | ) |
| Repayments on finance lease |
|
| (29,181 | ) |
|
| (14,072 | ) |
| Proceeds from notes payable |
|
| 1,325,535 |
|
|
| - |
|
| Repayment of notes payable |
|
| (389,542 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Net cash provided by (used in) financing activities |
|
| 833,915 |
|
|
| (17,610 | ) |
|
|
|
|
|
|
|
|
|
|
| Net change in cash and cash equivalents |
|
| 132,614 |
|
|
| 324,108 |
|
|
|
|
|
|
|
|
|
|
|
| Cash and Cash Equivalents, Beginning of Period |
|
| 442,098 |
|
|
| 117,990 |
|
|
|
|
|
|
|
|
|
|
|
| Cash and Cash Equivalents, End of Period |
| $ | 574,712 |
|
| $ | 442,098 |
|
|
|
|
|
|
|
|
|
|
|
| Supplemental disclosures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash paid for interest expense |
| $ | 51,891 |
|
| $ | 8,706 |
|
| Cash paid for income taxes |
| $ | 50 |
|
| $ | 50 |
|
|
|
|
|
|
|
|
|
|
|
| Non-Cash Investing and Financing Activities |
|
|
|
|
|
|
|
|
| Shares issued for prepaid consulting |
| $ | - |
|
| $ | 85,950 |
|
| Original issuance discount |
| $ | 24,465 |
|
| $ | - |
|
| Equipment purchased with capital lease |
| $ | - |
|
| $ | 157,184 |
|
| Adoption of ASC 842 operating lease asset and liability |
| $ | 540,651 |
|
| $ | - |
|
| Promissory note issued in Specialty acquistion |
| $ | 475,000 |
|
| $ | - |
|
| Intangible assets acquired in Specialty acquistion |
| $ | 806,000 |
|
| $ | - |
|
| Inventory acquired in Specialty acquistion |
| $ | 301,754 |
|
| $ | - |
|
| Property acquired in Specialty acquistion |
| $ | 46,156 |
|
| $ | - |
|
| Liabilities assumed in Specialty acquistion |
| $ | 10,277 |
|
| $ | - |
|
| Promissory note entered for deposit on equipment |
| $ | 58,192 |
|
| $ | - |
|
See accompanying notes to the consolidated financial statements
| F-6 |
| Table of Contents |
Notes To Consolidated Financial Statements
For The Year Ended December 31, 2019 and 2018
(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 16,675,000 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 1,200,000 shares of the outstanding 17,785,000 shares of Company common stock, resulting in a change in control. Accordingly, the transaction was accounted for as a reverse acquisition in which AmpliTech, Inc. was deemed to be the accounting acquirer, and the operations of the Company were consolidated for accounting purposes. The capital balances have been retroactively adjusted to reflect the reverse acquisition.
AmpliTech designs, engineers and assembles micro-wave 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 operating assets of Specialty Microwave Corporation (SMW), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and 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%. The Company also entered into a five-year lease on the property located at 120 Raynor Avenue, Ronkonkoma, NY with an option to buy the property during the first two years of the lease for $1,200,000 and then at fair market value for the remainder of the lease term (see Note 4).
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.
(2) Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements have been prepared using the accrual basis of accounting.
| F-7 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods presented. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers deposits that can be redeemed on demand and investments that have original maturities of less than three months, when purchased, to be cash equivalents. As of December 31, 2019, the Company’s cash and cash equivalents were deposited in two financial institutions.
Accounts Receivable
Trade accounts receivable are recorded at the net invoice value and are not interest bearing.
The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience and a review of the current status of accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change in the future. An allowance of $0 has been recorded at December 31, 2019 and 2018, respectively.
Inventories
Inventories, which consist primarily of raw materials, work in progress and finished goods, is stated at the lower of cost (first-in, first-out basis) or market (net realizable value) determined on average cost basis.
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 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Year Ended December 31, 2019 and 2018
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements.
Property and equipment are depreciated as follows:
| Description | Useful Life |
| Method | |
| Office equipment | 7 years |
| Straight-line | |
| Machinery and equipment | 5 to 7 years |
| Straight-line | |
| Computer equipment | 3 to 7 years |
| Straight-line | |
| Vehicles | 5 years |
| Straight-line |
Long-lived assets
Long lived assets, such as property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Circumstances which could trigger a review include, but are not limited to; significant decrease in the market price of the asset; significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount of fair value less costs to sell and would no longer be depreciated. The depreciable basis of assets that are impaired and continue in use is their respective fair values.
Goodwill and Intangible Assets
Intangibles assets include goodwill, trademarks, intellectual property and customer base acquired through the asset purchase of Specialty Microwave. The Company accounts for Other Intangible Assets under the guidance of ASC 350, “Intangibles-Goodwill and Other.” Under the guidance, other intangible assets with definite lives are amortized over their estimated useful lives Intangible assets with indefinite lives are tested annually for impairment. Goodwill is not amortized. We test goodwill balances for impairment annually at December 31 or whenever impairment indicators arise.
| F-9 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
Leases
On January 1, 2019, we adopted ASU No. 2016-02, “Leases (Topic 842),” which requires leases with durations greater than twelve months to be recognized on the balance sheet. We adopted this standard using the modified retrospective approach with an effective date as of the beginning of January 2019. Prior year financial statements were not restated under the new standard. We lease property and equipment under finance and operating leases. For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the lease term. 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.
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.
Determine the transaction price. Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. 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.
| F-10 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Year Ended December 31, 2019 and 2018
Allocate the transaction price to performance obligations in the contract. We typically do not have multiple performance obligations in our contracts with customers. As such, we generally recognize revenue upon transfer of the product to the customer’s control at contractually stated pricing.
Recognize revenue when or as we satisfy a performance obligation. We generally satisfy performance obligations at a point in time upon either shipment or delivery of goods, in accordance with the terms of each contract with the customer. We do not have significant
service revenue.
Reserves are recorded as a reduction in net sales and are not considered material to our consolidated statements of income for the years ended December 31, 2019 and 2018.
Research and Development
Research and development expenditures are charged to operations as incurred. The major components of research and development costs include consultants, outside service, and supplies. Research and development costs for the years ended December 31, 2019 and 2018 were $56,507 and $42,941.
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, 2019 and 2018, the Company had no material unrecognized tax benefits.
| F-11 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
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. The computation of weighted average shares outstanding and the basic and diluted earnings per share consisted of the following:
|
|
| Net Income |
|
| Shares |
|
| Per Share Amount |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
| For the year ended December 31, 2019: |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
| |||
| Basic EPS |
| $ | 5,945 |
|
|
| 49,536,326 |
|
| $ | 0.00 |
|
| Effect of dilutive stock options, warrants and series A shares |
|
|
|
|
|
| 40,462,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted EPS |
| $ | 5,945 |
|
|
| 89,998,615 |
|
| $ | 0.00 |
|
| For the year ended December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic EPS |
| $ | 328,993 |
|
|
| 47,771,668 |
|
| $ | 0.00 |
|
| Effect of dilutive stock options, warrants and series A shares |
|
|
|
|
|
| 39,902,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted EPS |
| $ | 328,993 |
|
|
| 87,674,310 |
|
| $ | 0.00 |
|
Fair Value of Assets and Liabilities
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy is used to information used to determine fair values. Categorization within fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined in the following categories as follows:
Level 1. Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Cash and cash equivalents are valued using inputs in Level 1.
| F-12 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
Level 2. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3. Inputs that are both significant to the fair value measurement and unobservable. These inputs rely on management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. The unobservable inputs are developed based on the best information available in the circumstances and may include the Company’s own data.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employees required service period, which is generally the vesting period.
Concentration of Credit Risk
Financial instruments that potentially subject the company to concentration of credit risk consist primarily of accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses. Therefore, management does not believe significant credit risks exist at December 31, 2019. Sales to the Company’s two largest customers represented approximately 11% and 10% of total sales for the year ended December 31, 2019.
| F-13 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
Recent Accounting Pronouncements
On January 1, 2019, we adopted ASU No. 2016-02, “Leases (Topic 842),” which requires leases with durations greater than twelve months to be recognized on the balance sheet. We adopted this standard using the modified retrospective approach with an effective date as of the beginning of January 2019. Prior year financial statements were not restated under the new standard. We lease property and equipment under finance and operating leases. For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the lease term. 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.
In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard became effective for us on January 1, 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the fair value measurements disclosures with the primary focus to improve effectiveness of disclosures in the notes to the financial statements that is most important to the users. The new guidance modifies the required disclosures related to the valuation techniques and inputs used, uncertainty in measurement, and changes in measurements applied. ASU 2018-13 will be effective for the Company for its fiscal year beginning after December 15, 2019 and each quarterly period thereafter. Early adoption is permitted. The Company is currently assessing the impact this new guidance may have on the Company’s consolidated financial statements and footnote disclosures.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. This ASU removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We are currently assessing the impact of this standard on our combined financial statements.
| F-14 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of a business or as acquisitions (or disposals) of assets. ASU No. 2017-01 is effective for annual periods beginning after December 15, 2018, with early adoption permitted under certain circumstances. The amendments of ASU No. 2017-01 were adopted by the Company effective January 1, 2019. The adoption of this standard had no impact on our consolidated financial position or results of operations.
We do not expect the adoption of these or other recently issued accounting pronouncements to have a significant impact on our results of operation, financial position or cash flow.
3) Revenues
The following table presents sales disaggregated based on geographic regions by entity and for the years ended:
| Amplitech Inc. |
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
|
| ||
| Domestic sales |
| $ | 1,706,946 |
|
| $ | 2,007,357 |
|
| Foreign sales |
|
| 905,056 |
|
|
| 390,061 |
|
| Total sales |
| $ | 2,612,002 |
|
| $ | 2,397,418 |
|
| Specialty Microwave |
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
|
| ||
| Domestic sales |
| $ | 454,235 |
|
| $ | - |
|
| Foreign sales |
|
| 56,129 |
|
|
| - |
|
| Total sales |
| $ | 510,364 |
|
| $ | - |
|
| F-15 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
| (4) Acquisition of Specialty Microwave |
On September 12, 2019, AmpliTech Group Inc. acquired substantially all of the operating assets of Specialty Microwave Corporation (SMW), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and 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%. Additional acquisition costs that were expensed at December 31, 2019 totaled approximately $77,000. The Company also entered into a five- year lease on the 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.
As both companies are similar in nature, the acquisition will allow the combined resources and customer base to support more productivity and help in the development of new product lines. We started consolidating both companies for financial reporting purposes as of September 12, 2019. From the date of acquisition to December 31, 2019, SMW reported revenue of $ 510,364.
The fair value of the purchase consideration issued to Specialty Microwave was allocated to the net tangible assets acquired. The Company accounted for the Acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $337,633. The excess of the aggregate fair value of the net tangible assets has been allocated to net intangible assets of $806,000.
The following table summarizes the allocation of the purchase price of the acquisition:
| Provisional purchase consideration at fair value: |
|
|
| |
| Cash |
| $ | 668,633 |
|
| Promissory Note |
|
| 475,000 |
|
| Total purchase price |
| $ | 1,143,633 |
|
|
|
|
|
|
|
| Allocation of purchase price: |
|
|
|
|
| Inventory |
| $ | 301,754 |
|
| Property and equipment |
|
| 46,156 |
|
| Goodwill |
|
| 120,136 |
|
| Tradename |
|
| 70,233 |
|
| Customer relationships |
|
| 412,860 |
|
| Intellectual property |
|
| 202,771 |
|
| Less: Customer Deposit |
|
| (10,277 | ) |
| Net assets acquired |
| $ | 1,143,633 |
|
| F-16 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
The following table summarizes the Company’s consolidated results of operations for the three and nine months ended, as well as unaudited pro forma consolidated results of operations as though the acquisition had occurred on January 1, 2018:
|
|
| For the year ended |
| |||||
|
|
| 31-Dec-19 |
| |||||
|
|
| As Reported |
|
| Pro Forma |
| ||
|
|
|
|
|
|
|
| ||
| Net sales |
| $ | 3,122,630 |
|
| $ | 4,041,837 |
|
| Net income attributable to common shareholders |
| $ | 5,945 |
|
| $ | 141,053 |
|
|
|
|
|
|
|
|
|
|
|
| Earnings per common share, basic and diluted: |
|
|
|
|
|
|
|
|
| Basic |
| $ | 0.00 |
|
| $ | 0.00 |
|
| Diluted |
| $ | 0.00 |
|
| $ | 0.00 |
|
|
|
| For the year ended |
| |||||
|
|
| 31-Dec-18 |
| |||||
|
|
| As Reported |
|
| Pro Forma |
| ||
|
|
|
|
|
|
|
| ||
| Net sales |
| $ | 2,397,418 |
|
| $ | 3,085,889 |
|
| Net income attributable to common shareholders |
| $ | 328,993 |
|
| $ | 554,677 |
|
|
|
|
|
|
|
|
|
|
|
| Earnings per common share, basic and diluted: |
|
|
|
|
|
|
|
|
| Basic |
| $ | 0.00 |
|
| $ | 0.01 |
|
| Diluted |
| $ | 0.00 |
|
| $ | 0.00 |
|
The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the Acquisition been completed as of January 1, 2018 or to project potential operating results as of any future date or for any future periods.
| F-17 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
(5) Inventories
The inventory value at December 31, 2019 and 2018 was as follows:
|
|
| December 31, 2019 |
|
| December 31, 2018 |
| ||
|
|
|
|
|
|
|
| ||
| Raw Materials |
| $ | 403,168 |
|
| $ | 279,437 |
|
| Work-in Progress |
|
| 135,223 |
|
|
| 69,480 |
|
| Finished Goods |
|
| 124,510 |
|
|
| 118,545 |
|
| Engineering Models |
|
| 3,726 |
|
|
| 3,726 |
|
|
|
|
|
|
|
|
|
|
|
| Subtotal |
| $ | 666,856 |
|
| $ | 471,188 |
|
| Less: Reserve for Obsolescence |
|
| (109,146 | ) |
|
| (80,000 | ) |
|
|
|
|
|
|
|
|
|
|
| Total |
| $ | 557,710 |
|
| $ | 391,188 |
|
(6) Property and Equipment
Property and Equipment with estimated useful lives of three, five and seven years consisted of the following at December 31, 2019 and 2018:
|
|
| December 31, 2019 |
|
| December 31, 2018 |
| ||
|
|
|
|
|
|
|
| ||
| Lab Equipment |
| $ | 728,620 |
|
| $ | 725,348 |
|
| Manufacturing Equipment |
|
| 25,000 |
|
|
| - |
|
| Automobiles |
|
| 19,527 |
|
|
| - |
|
| Furniture and Fixtures |
|
| 31,201 |
|
|
| 20,192 |
|
|
|
|
|
|
|
|
|
|
|
| Subtotal |
|
| 804,348 |
|
|
| 745,540 |
|
| Less: Accumulated Depreciation |
|
| (606,238 | ) |
|
| (564,795 | ) |
|
|
|
|
|
|
|
|
|
|
| Total |
| $ | 198,110 |
|
| $ | 180,745 |
|
Depreciation expense for the years ended December 31, 2019 and 2018 was $41,443 and $38,821 respectively.
| F-18 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
(7) Intangible Assets
Goodwill
The goodwill is related to the acquisition of Specialty Microwave Corp. on September 12, 2019 and is primarily related to expected improvements and technology performance and functionality, as well sales growth from future product and service offerings and new customers, together with certain intangible assets that do not qualify for separate recognition. Goodwill is generally not amortizable for tax purposes and is not amortizable for financial statement purposes. As of December 31, 2019, goodwill is valued at $120,136.
Other Intangible Assets
Intangible assets with an estimated useful life of fifteen years consisted of the following at December 31, 2019:
|
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net |
|
| Weighted Average Life |
| ||||
| Trade name |
| $ | 70,233 |
|
| $ | - |
|
| $ | 70,233 |
|
| Indefinite |
| |
| Customer relationships |
|
| 412,860 |
|
|
| 8,295 |
|
|
| 404,565 |
|
|
| 14.7 |
|
| Intellectual Property |
|
| 202,771 |
|
|
| 4,140 |
|
|
| 198,631 |
|
|
| 14.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| $ | 685,864 |
|
| $ | 12,435 |
|
| $ | 673,429 |
|
|
|
|
|
(8) Line of Credit
On November 16, 2015, the Company entered into a commercial line of credit for $150,000. This agreement will be paid over a three-year term with monthly payments equal to 2.780% of the outstanding balance plus accrued interest. The initial variable interest rate on this agreement is 5.25% per annum. This interest rate may change every year on the anniversary date or change date to reflect the new prime rate in effect as per the Wall Street Journal plus 2%. The interest rate will never be greater than 25% or less than 5%. On April 20, 2016, the existing line of credit was increased from $150,000 to $250,000 with an extended maturity date of April 20, 2019. The outstanding balance as of December 31, 2019 and 2018 was $0 and $72,897, respectively. The Company repaid the line of credit and interest $74,283 during the year ended December 31, 2019. Interest expense relating to this line of credit for the years ended December 31, 2019 and 2018 was $1,386 and $6,979, respectively. This line of credit was closed on October 4, 2019.
On September 12, 2019, Amplitech entered a new business line of credit for $500,000 maturing on October 1, 2020. The line will be evaluated monthly on a borrowing base formula advancing 75% of the accounts receivables aged less than 90 days and 50% of inventory raw materials costs. The interest rate shall be based upon the Wall Street Journal Prime Rate, plus 1%. As of December 31, 2019, the outstanding balance is $0.
| F-19 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
(9) Leases
We adopted ASC 842 “Leases” using the modified retrospective approach, electing the practical expedient that allows us not to restate our comparative periods prior to the adoption of the standard on January 1, 2019. As such, the disclosures required under ASC 842 are not presented for periods before the date of adoption.
The following was included in our balance sheet as of December 31, 2019:
| Operating leases |
| As of December 31, 2019 |
| |
| Assets |
|
|
| |
| ROU operating lease assets |
| $ | 465,092 |
|
|
|
|
|
|
|
| Liabilities |
|
|
|
|
| Current portion of operating lease |
|
| 130,628 |
|
| Operating lease, net of current portion |
|
| 338,344 |
|
| Total operating lease liabilities |
| $ | 468,972 |
|
|
| ||||
| Finance leases |
|
|
|
|
| Assets |
|
|
|
|
| Property and equipment, gross |
| $ | 157,184 |
|
| Accumulated depreciation |
|
| (33,682 | ) |
| Property and equipment, net |
| $ | 123,502 |
|
| Liabilities |
|
|
|
|
| Current portion of financing lease |
| $ | 30,556 |
|
| Finance lease, net of current portion |
|
| 83,376 |
|
| Total operating lease liabilities |
| $ | 113,932 |
|
The weighted average remaining lease term and weighted average discount rate at December 31, 2019 were as follows:
| Weighted average remaining lease term (years) |
| December 31, 2019 |
| |
| Operating leases |
|
| 4.18 |
|
| Finance leases |
|
| 3.50 |
|
|
|
|
|
|
|
| Weighted average discount rate |
| December 31, 2019 |
| |
| Operating leases |
|
| 6.34 | % |
| Finance leases |
|
| 4.89 | % |
| F-20 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
Finance Lease
The Company entered into a 60-month lease agreement to finance certain laboratory equipment in July 2018 with a purchase option of $1. As such, the Company has accounted for this transaction as a finance lease.
The following table reconciles future minimum finance lease payments to the discounted lease liability as of December 31, 2019:
| 2020 |
| $ | 37,778 |
|
| 2021 |
|
| 37,778 |
|
| 2022 |
|
| 37,778 |
|
| 2023 |
|
| 18,889 |
|
| Total lease payments |
|
| 132,224 |
|
| Less imputed interest |
|
| (10,112 | ) |
| Less sales tax |
|
| (8,179 | ) |
| Total lease obligations |
|
| 113,932 |
|
| Less current obligations |
|
| (30,556 | ) |
| Long-term lease obligations |
| $ | 83,376 |
|
Operating Leases
On December 4, 2015, the Company entered into a new operating lease agreement to rent office space in Bohemia, NY. This five-year agreement commenced February 1, 2016 with an annual rent of $50,000 and 3.75% increases in each successive lease year.
On January 15, 2016, the Company entered into a five-year agreement to lease 2 copiers with and annual payment of $2,985.
On September 12, 2019, the Company entered into a new operating lease agreement to rent office space in Ronkonkoma, NY. This five- year agreement commenced on September 12, 2019 with an annual rent of $90,000 and 3% increase in each successive lease year beginning in 2021. The Company has an option to buy the property during the first two years of the lease for $1,200,000 and then at fair market value for the remainder of the lease term.
On November 27, 2019, the Company entered a 39-month agreement to lease an automobile with a monthly payment of $420.
| F-21 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
The following table reconciles future minimum operating lease payments to the discounted lease liability as of December 31, 2019:
| 2020 |
| $ | 156,169 |
|
| 2021 |
|
| 102,849 |
|
| 2022 |
|
| 100,521 |
|
| 2023 |
|
| 98,765 |
|
| 2024 |
|
| 75,972 |
|
| Total lease payments |
|
| 534,276 |
|
| Less imputed interest |
|
| (65,304 | ) |
| Total lease obligations |
|
| 468,972 |
|
| Less current obligations |
|
| (130,628 | ) |
| Long-term lease obligations |
| $ | 338,344 |
|
(10) Notes Payable
Promissory Note:
On September 12, 2019, AmpliTech Group Inc. acquired substantially all of the operating assets of Specialty Microwave Corporation (SMW), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and 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%. Beginning November 1, 2019, payment of principal and interest shall be due payable in fifty-nine (59) monthly payments of $9,213 with a final payment due October 1, 2024 of $9,203. As of December 31, 2019, the balance of this promissory note was $454,544. Principal payments of $20,456 along with interest expense of $7,185 was paid for the year ended December 31, 2019. The promissory note is secured by certain assets of the Company.
Loan Payable:
On March 18, 2019, the Company secured additional financing of $350,000, net of a $24,465 original issuance discount. The note bears interest at a rate of 10.79% per annum, under a five-year term to aid our growth initiatives. The loan balance of $324,199, including accrued interest was paid in full in October 2019.
On September 12, 2019, the Company entered a $1,000,000 seven- year term loan with amortization based on a ten- year repayment schedule. The loan bears interest at a fixed rate of 6.75% with a monthly repayment amount of $11,533. As of December 31, 2019, the balance of the loan was $982,423 and interest expense paid was $17,022. This loan is collateralized by all Company assets.
| F-22 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
In addition, on September 12, 2019, the Company was approved for a $250,000 equipment leasing facility. On December 20, 2019, the Company borrowed $58,192 against this facility to be paid over a three-year term with monthly payments of $ 1,736 at an interest rate of 5.26%. The balance as of December 31, 2019 was $56,683.
Future principal payments over the term of the loans as of December 31, 2019 are as follows:
| For the years ended December 31, |
| Payments |
| |
| 2020 |
|
| 169,697 |
|
| 2021 |
|
| 187,969 |
|
| 2022 |
|
| 198,398 |
|
| 2023 |
|
| 191,725 |
|
| Thereafter |
|
| 745,861 |
|
| Total remaining payments |
| $ | 1,493,650 |
|
(11) Income Taxes
In 2017, the U.S. enacted the Tax Cuts and Jobs Act which significantly changed U.S. tax law. The Act lowered the U.S. statutory federal income tax rate from 35% to 21% effective January 1, 2018. This had an effect on the value of the Company’s net operating loss carryover, but since the deferred tax asset is fully reserved, it had no impact on the Company’s financial statements. The impact of the change is reflected in the table below.
The provision for (benefit from) income taxes for the years ended December 31, 2019 and 2018 are as follows, at the expected combined effective tax rate of approximately 26%.
| F-23 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
|
|
| December 31, |
| |||||
|
|
| 2019 |
|
| 2018 |
| ||
| Federal and state net operating loss |
| $ | 1,248 |
|
| $ | 69,089 |
|
| Meals & entertainment |
|
| 90 |
|
|
| 61 |
|
| Life insurance |
|
| 825 |
|
|
| 825 |
|
| Goodwill amortization |
|
| (888 | ) |
|
| - |
|
| Stock-based compensation |
|
| 24,875 |
|
|
| 7,879 |
|
| Depreciation |
|
| (5,474 | ) |
|
| 737 |
|
| State tax, net of federal benefit |
|
| (62 | ) |
|
| (6,580 | ) |
| Other |
|
| (3,344 | ) |
|
| (3,344 | ) |
| Tax rate change |
|
| - |
|
|
| 72,413 |
|
| Change in Valuation Allowance |
|
| (17,180 | ) |
|
| (141,098 | ) |
| Total income tax provision |
| $ | - |
|
| $ | - |
|
The provision for Federal income tax consists of the following for the years ended December 31, 2019 and 2018:
|
|
| December 31, |
| |||||
|
|
| 2019 |
|
| 2018 |
| ||
| Net operating loss carryforwards |
| $ | 19,273 |
|
| $ | 75,922 |
|
| Depreciation |
|
| 3,191 |
|
|
| 8,665 |
|
| Goodwill amortization |
|
| (888 | ) |
|
| - |
|
| Stock based compensation |
|
| 137,934 |
|
|
| 92,102 |
|
| Valuation allowance |
|
| (159,509 | ) |
|
| (176,689 | ) |
| Total net deferred tax assets |
| $ | - |
|
| $ | - |
|
The Company has maintained a full valuation allowance against the total deferred tax assets for all periods due to the uncertainty of future utilization.
As of December 31, 2019, the Company has net federal and state net operating loss carry forwards of approximately $91,777 that begin to expire in 2037.
| F-24 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
(12) Stockholders’ Equity
Preferred Stock
On July 10, 2013, the board of directors of the company approved a certificate of amendment to the articles of incorporation and changed the authorized capital stock of the Company to include and authorize 500,000 shares of Preferred Stock, par value $0.001 per share.
In July 2013, the Board of Directors of the Company designated 140,000 shares of Preferred Stock as Series A Convertible Preferred Stock (or “Series A”). Furthermore, each share of Series A is convertible into 100 shares of common stock at any time after issuance and the holder of each share of Series A is entitled to 100 votes when the vote of holders of the Company’s common stock is sought. In January 2015, the Board of Directors of the Company increased the number of Series A designated from 140,000 to 401,000. There are currently 1,000 shares of Series A outstanding.
In April 2015, the Board of Directors of the Company designated 75,000 shares of Preferred Stock as Series B Convertible Preferred Stock (or “Series B”). The Series B shares are convertible into common stock at a conversion rate of one Series B share for 289 common shares. In addition, a holder of Series B Preferred Stock shall not be entitled to have any voting rights and shall hold a liquidation preference junior to a holder of Series A shares and pari passu with common shareholders. There are currently no shares of Series B outstanding.
Common Stock:
The Company originally authorized 50,000,000 shares of common stock with a par value of $0.001. Effective May 20, 2014, the Company increased its authorized shares of common stock from 50,000,000 to 500,000,000. As of December 31, 2019, and 2018, the Company had 49,086,326 and 48,336,326 shares of common stock issued and outstanding, respectively.
On February 14, 2018, the Company entered into an advisory agreement to assist in product sales and distribution in Asia and the Middle East. The advisor was paid compensation of a total of 2.2 million shares of restricted common stock valued at the closing market price on the date the shares were issued. The first installment of 500,000 shares was issued on February 14, 2018 at $0.035 and the second installment of 1,700,000 shares on April 9, 2018 at $0.04. The total value of shares issued for services aggregated to $85,500. As of December 31, 2019, $80,633 of the stock- expense had been recognized and $5,317 remained as a prepaid to be amortized over a two-year service period.
On July 2, 2019, Amplitech Group, Inc. entered an engagement for strategic intellectual property consulting services with ipCapital Group (“ipCG”), to assist in the formulation and execution of Amplitech’s intellectual property (“IP”) strategy around its proprietary trade secrets, knowhow and technology to formulate a comprehensive “ipStory”. The consideration paid to ipCG is $30,000, of which ipCG has agreed to accept 200,000 shares of restricted common stock upon completion of the project. These shares were issued on October 15, 2019 at a value of $14,000.
| F-25 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
On October 15, 2019, the Company engaged Maxim Group LLC (“Maxim”) as its financial advisor to assist the Company in growth strategy to the investment community with an ultimate goal of a potential up-list and capital raise on NASDAQ.
As consideration for Maxim’s services, Maxim shall be entitled to receive, and the Company agrees to pay Maxim, the following compensation:
|
| (a) | The Company will issue to Maxim or its designees 2,000,000 shares of the Company’s Common Stock (“Common Stock”) based on the following schedule: |
|
| i. | 550,000 restricted shares of Common Stock upon the execution of the Agreement implying a price per share of $0.10. These shares were valued on October 15, 2019 at $0.054 with a value of $29,920. As of December 31,2019, $12,589 was expensed with the balance of $17,331 in prepaid expenses to be amortized over the vesting period. The shares were issued on January 13, 2020. |
|
| ii. | $54,000 payable in 450,000 restricted shares of Common Stock six months from the date of the Agreement implying a price per shares of $0.12. These shares were valued on October 15, 2019 at a price of $0.054 with a value of $24,480. As of December 31, 2019, these shares have not been issued and classified as common stock payable. |
|
| iii. | 1,000,000 restricted shares of Common Stock upon an up listing of the Company’s Common Stock to a national exchange (NASDAQ or NYSE). |
Options:
During 2014, the Company granted the chief executive officer of the Company an immediately exercisable option to purchase an aggregate of 400,000 shares of Series A at an exercise price of $0.0206 per share. There is no expiration date for this option and the related expense has been recorded in prior years.
| F-26 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Consolidated Financial Statements
For The Years Ended December 31, 2019 and 2018
Warrants:
On April 25, 2019, Wayne Homschek joined the Board of Directors as an independent Director who will aid in corporate strategy, financing and investor relations. He will be paid $5,000 per month for one year and receive a warrant, exercisable into 3,000,000 shares of common stock at an exercise price of $0.03 per share. As per the agreement, 1,500,000 warrants vest in six months and the remaining balance of 1,500,000 shall vest one year later. The following table summarizes the warrants outstanding of the Company for the year ended December 31, 2019:
|
|
|
|
| Weighted Average |
|
|
| |||||
|
|
| Number of Warrants |
|
| Exercise Price ($) |
|
| Intrinsic Value |
| |||
| Outstanding at December 31, 2018 |
|
| - |
|
|
| - |
|
|
|
| |
| Granted |
|
| 3,000,000 |
|
|
| .03 |
|
|
|
| |
| Exercised |
|
| - |
|
|
| - |
|
|
|
| |
| Expired |
|
| - |
|
|
| - |
|
|
|
| |
| Outstanding at December 31, 2019 |
|
| 3,000,000 |
|
|
| .03 |
|
| $ | 113,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exercisable at December 31, 2019 |
|
| 1,500,000 |
|
|
| .03 |
|
| $ | 56,700 |
|
The Company has calculated the estimated fair market value of these warrants at $142,950, using the Black-Scholes model and the following assumptions: expected term 5.75 years, stock price $0.05, exercise price $0.03, 153.48% volatility, 2.35% risk free rate, and no forfeiture rate. The weighted average life of these warrants is 9.32 years.
The Company recognized stock-based compensation of $104,023 and $0 for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, the total remaining unrecognized compensation cost related to non-vested warrants was $38,927.
(13) Subsequent events
In accordance with ASC 855-10, Company management reviewed all material events through the date of this report.
There are no material subsequent events to report.
| F-27 |
| Table of Contents |
| Condensed Consolidated Balance Sheets | |||||||||
|
|
|
|
|
|
|
| |||
|
|
| September 30, |
|
| December 31, |
| |||
|
|
| 2020 |
|
| 2019 |
| |||
|
|
| (Unaudited) |
|
|
|
| |||
| Assets |
|
|
|
|
|
| |||
| Current Assets |
|
|
|
|
|
| |||
| Cash and cash equivalents |
| $ | 425,876 |
|
| $ | 574,712 |
| |
| Accounts receivable |
|
| 766,489 |
|
|
| 619,195 |
| |
| Inventories, net |
|
| 602,436 |
|
|
| 557,710 |
| |
| Prepaid expenses |
|
| 72,504 |
|
|
| 124,209 |
| |
| Total Current Assets |
|
| 1,867,305 |
|
|
| 1,875,826 |
| |
|
|
|
|
|
|
|
|
|
| |
| Property and equipment, net |
|
| 299,566 |
|
|
| 198,110 |
| |
| Right of use operating lease assets |
|
| 365,064 |
|
|
| 465,092 |
| |
| Intangible assets, net |
|
| 642,553 |
|
|
| 673,429 |
| |
| Goodwill |
|
| 120,136 |
|
|
| 120,136 |
| |
| Security deposits |
|
| 27,821 |
|
|
| 27,821 |
| |
|
|
|
|
|
|
|
|
|
| |
| Total Assets |
| $ | 3,322,445 |
|
| $ | 3,360,414 |
| |
|
|
|
|
|
|
|
|
|
| |
| Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
| |
| Current Liabilities |
|
|
|
|
|
|
|
| |
| Accounts payable and accrued expenses |
| $ | 201,394 |
|
| $ | 154,507 |
| |
| Customer deposits |
|
| 112,612 |
|
|
| 35,680 |
| |
| Current portion of financing lease |
|
| 31,695 |
|
|
| 30,556 |
| |
| Current portion of operating lease |
|
| 98,275 |
|
|
| 130,628 |
| |
| Current portion of notes payable |
|
| 208,297 |
|
|
| 169,697 |
| |
| Line of credit |
|
| 300,000 |
|
|
| - |
| |
| Total Current Liabilities |
|
| 952,273 |
|
|
| 521,068 |
| |
|
|
|
|
|
|
|
|
|
| |
| Long Term Liabilities |
|
|
|
|
|
|
|
| |
| Finance lease, net of current portion |
|
| 59,327 |
|
|
| 83,376 |
| |
| Operating lease, net of current portion |
|
| 273,672 |
|
|
| 338,344 |
| |
| Notes payable, net of current portion |
|
| 1,453,791 |
|
|
| 1,323,953 |
| |
| Total Liabilities |
|
| 2,739,063 |
|
|
| 2,266,741 |
| |
|
|
|
|
|
|
|
|
|
| |
| Commitments and Contingencies |
|
| - |
|
|
| - |
| |
|
|
|
|
|
|
|
|
|
| |
| Stockholders' Equity |
|
|
|
|
|
|
|
| |
| Series A convertible preferred stock, par |
|
|
|
|
|
|
|
| |
| value $0.001, 401,000 shares authorized, |
|
|
|
|
|
|
|
| |
| 1,000 shares issued and |
|
|
|
|
|
|
|
| |
| outstanding, respectively |
|
| 1 |
|
|
| 1 |
| |
| Series B convertible preferred stock, par |
|
|
|
|
|
|
|
| |
| value $0.001, 75,000 shares authorized, 0 |
|
|
|
|
|
|
|
| |
| shares issued and outstanding, respectively |
|
| - |
|
|
| - |
| |
| Common Stock, par value $0.001, |
|
|
|
|
|
|
|
| |
| 500,000,000 shares authorized, |
|
|
|
|
|
|
|
| |
| 51,588,958 and 49,086,326 shares |
|
|
|
|
|
|
|
| |
| issued and outstanding, respectively |
|
| 51,589 |
|
|
| 49,086 |
| |
| Common stock payable |
|
| - |
|
|
| 24,480 |
| |
| Additional paid-in capital |
|
| 1,923,824 |
|
|
| 1,862,919 |
| |
| Accumulated deficit |
|
| (1,392,032 | ) |
|
| (842,813 | ) | |
|
|
|
|
|
|
|
|
|
| |
| Total Stockholders' Equity |
|
| 583,382 |
|
|
| 1,093,673 |
| |
|
|
|
|
|
|
|
|
|
| |
| Total Liabilities and |
|
|
|
|
|
|
|
| |
| Stockholders' Equity |
| $ | 3,322,445 |
|
| $ | 3,360,414 |
| |
|
|
|
|
|
|
|
|
|
| |
| See accompanying notes to the unaudited condensed consolidated financial statements | |||||||||
| F-28 |
| Table of Contents |
| Condensed Consolidated Statements of Operations | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
| For The Three Months Ended |
|
| For The Nine Months Ended |
| ||||||||||
|
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||
|
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Revenue |
| $ | 1,150,732 |
|
| $ | 708,896 |
|
| $ | 2,567,379 |
|
| $ | 2,018,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of goods sold |
|
| 630,486 |
|
|
| 358,526 |
|
|
| 1,581,831 |
|
|
| 983,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross Profit |
|
| 520,246 |
|
|
| 350,370 |
|
|
| 985,548 |
|
|
| 1,035,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling, general and administrative expense |
|
| 475,248 |
|
|
| 478,297 |
|
|
| 1,456,266 |
|
|
| 1,021,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (Loss) From Operations |
|
| 44,998 |
|
|
| (127,927 | ) |
|
| (470,718 | ) |
|
| 13,806 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest expense, net |
|
| (27,988 | ) |
|
| (10,457 | ) |
|
| (78,501 | ) |
|
| (24,971 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (Loss) Before Income Taxes |
|
| 17,010 |
|
|
| (138,384 | ) |
|
| (549,219 | ) |
|
| (11,165 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Provision For Income Taxes |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Income (Loss) |
| $ | 17,010 |
|
| $ | (138,384 | ) |
| $ | (549,219 | ) |
| $ | (11,165 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Income (Loss) Per Share; |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
| $ | 0.00 |
|
| $ | (0.00 | ) |
| $ | (0.01 | ) |
| $ | (0.00 | ) |
| Diluted |
| $ | 0.00 |
|
| $ | (0.00 | ) |
| $ | (0.01 | ) |
| $ | (0.00 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted Average Shares Outstanding; |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
| 50,964,244 |
|
|
| 48,336,326 |
|
|
| 50,015,773 |
|
|
| 48,336,326 |
|
| Diluted |
|
| 90,921,254 |
|
|
| 48,336,326 |
|
|
| 50,015,773 |
|
|
| 48,336,326 |
|
| See accompanying notes to the unaudited condensed consolidated financial statements |
| F-29 |
| Table of Contents |
| Condensed Consolidated Statements of Cash Flows |
| (Unaudited) |
|
|
| For The Nine |
|
| For The Nine |
| ||
|
|
| Months Ended |
|
| Months Ended |
| ||
|
|
| September 30, |
|
| September 30, |
| ||
| Cash Flows from Operating Activities: |
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
|
| ||
| Net Loss |
| $ | (549,219 | ) |
| $ | (11,165 | ) |
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
| 67,678 |
|
|
| 31,997 |
|
| Amortization of prepaid consulting |
|
| 37,108 |
|
|
| 32,184 |
|
| Amortization of right-of-use operating lease asset |
|
| 100,028 |
|
|
| 44,229 |
|
| Stock based compensation |
|
| 38,928 |
|
|
| 119,148 |
|
| Amortization of debt discount |
|
| - |
|
|
| 2,650 |
|
| Changes in Operating Assets and Liabilities: |
|
|
|
|
|
|
|
|
| Accounts receivable |
|
| (147,294 | ) |
|
| (302,929 | ) |
| Inventories |
|
| (44,726 | ) |
|
| 19,225 |
|
| Prepaid expenses |
|
| (43,595 | ) |
|
| 59,145 |
|
| Security deposits |
|
| - |
|
|
| (15,000 | ) |
| Accounts payable and accrued expenses |
|
| 46,887 |
|
|
| 117,904 |
|
| Operating lease liability |
|
| (97,025 | ) |
|
| (39,261 | ) |
| Customer deposits |
|
| 76,932 |
|
|
| (53,004 | ) |
| Total Adjustments |
|
| 34,921 |
|
|
| 16,288 |
|
|
|
|
|
|
|
|
|
|
|
| Net cash (used in) provided by operating activities |
|
| (514,298 | ) |
|
| 5,123 |
|
|
|
|
|
|
|
|
|
|
|
| Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
| Purchase of equipment |
|
| (11,557 | ) |
|
| (668,633 | ) |
| Net cash used in investing activities |
|
| (11,557 | ) |
|
| (668,633 | ) |
|
|
|
|
|
|
|
|
|
|
| Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
| Proceeds from line of credit |
|
| 300,000 |
|
|
| - |
|
| Repayment of line of credit, net |
|
| - |
|
|
| (72,897 | ) |
| Repayments on finance lease |
|
| (22,910 | ) |
|
| (21,754 | ) |
| Proceeds from notes payable |
|
| 232,200 |
|
|
| 1,298,374 |
|
| Repayment of notes payable |
|
| (132,272 | ) |
|
| - |
|
| Net cash provided by financing activities |
|
| 377,018 |
|
|
| 1,203,723 |
|
|
|
|
|
|
|
|
|
|
|
| Net change in cash and cash equivalents |
|
| (148,837 | ) |
|
| 540,213 |
|
|
|
|
|
|
|
|
|
|
|
| Cash and Cash Equivalents, Beginning of Period |
|
| 574,712 |
|
|
| 442,098 |
|
|
|
|
|
|
|
|
|
|
|
| Cash and Cash Equivalents, End of Period |
| $ | 425,875 |
|
| $ | 982,311 |
|
|
|
|
|
|
|
|
|
|
|
| Supplemental disclosures: |
|
|
|
|
|
|
|
|
| Cash paid for interest expense |
| $ | 71,125 |
|
| $ | 20,388 |
|
| Cash paid for income taxes |
| $ | - |
|
| $ | 50 |
|
|
|
|
|
|
|
|
|
|
|
| Non-Cash Investing and Financing Activities |
|
|
|
|
|
|
|
|
| Original issuance discount |
| $ | - |
|
| $ | 24,465 |
|
| Adoption of ASC 842 operating lease asset and liability |
| $ | - |
|
| $ | 523,313 |
|
| Promissory note on equipment |
| $ | 68,510 |
|
| $ | - |
|
| Equipment received for prepaid assets |
| $ | 58,192 |
|
| $ | - |
|
| Common stock issued for common stock payable |
| $ | 24,480 |
|
| $ | - |
|
| Cashless exercise of warrant |
| $ | 2,053 |
|
| $ | - |
|
| Promissory note issued in Specialty acquisition |
| $ | - |
|
| $ | 475,000 |
|
| Intangible assets acquired in Specialty acquisition |
| $ | - |
|
| $ | 806,000 |
|
| Inventory acquired in Specialty acquisition |
| $ | - |
|
| $ | 301,754 |
|
| Property acquired in Specialty acquisition |
| $ | - |
|
| $ | 46,156 |
|
| Liabilities assumed in Specialty acquisition |
| $ | - |
|
| $ | 10,277 |
|
|
|
|
|
|
|
|
| ||
| See accompanying notes to the unaudited condensed consolidated financial statements | ||||||||
| F-30 |
| Table of Contents |
| Condensed Consolidated Statements of Stockholders' Equity |
| For The Three Months and Nine Months Ended September 30, 2020 and 2019 |
| (Unaudited) |
|
|
| For The Three Months Ended September 30, 2020 | ||||||||||||||||||||||||||||||
|
|
| Series A Convertible Preferred |
|
| Common Stock |
|
| Common |
|
| Additional |
|
|
|
| Total |
| |||||||||||||||
|
|
| Number of |
|
| Par |
|
| Number of |
|
| Par |
|
| Stock |
|
| Paid-In |
|
| Accumulated |
|
| Stockholders' |
| ||||||||
|
|
| Shares |
|
| Value |
|
| Shares |
|
| Value |
|
| Payable |
|
| Capital |
|
| Deficit |
|
| Equity |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
| Balance, June 30, 2020 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 49,086,326 |
|
| $ | 49,086 |
|
| $ | 24,480 |
|
| $ | 1,886,614 |
|
| $ | (1,409,042 | ) |
| $ | 551,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock issued for common stock payable |
|
| - |
|
|
| - |
|
|
| 450,000 |
|
|
| 450 |
|
|
| (24,480 | ) |
|
| 24,030 |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 15,233 |
|
|
| - |
|
|
| 15,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock issued upon exercise of warrants |
|
| - |
|
|
| - |
|
|
| 2,052,632 |
|
|
| 2,053 |
|
|
| - |
|
|
| (2,053 | ) |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income for the three months ended September 30, 2020 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 17,010 |
|
|
| 17,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, September 30, 2020 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 51,588,958 |
|
| $ | 51,589 |
|
| $ | - |
|
| $ | 1,923,824 |
|
| $ | (1,392,032 | ) |
| $ | 583,382 |
|
|
|
| For The Three Months Ended September 30, 2019 |
| |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
| Balance, June 30, 2019 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 48,336,326 |
|
| $ | 48,336 |
|
| $ | - |
|
| $ | 1,765,496 |
|
| $ | (721,539 | ) |
| $ | 1,092,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 69,378 |
|
|
| - |
|
|
| 69,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss for the three months ended September 30, 2019 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (138,384 | ) |
|
| (138,384 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, September 30, 2019 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 48,336,326 |
|
| $ | 48,336 |
|
| $ | - |
|
| $ | 1,834,874 |
|
| $ | (859,923 | ) |
| $ | 1,023,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For The Nine Months Ended September 30, 2020 |
| |||||||||||||||||||||||||||||
|
|
| Series A Convertible Preferred |
|
| Common Stock |
|
| Common |
|
| Additional |
|
| Total |
| |||||||||||||||||
|
|
| Number of |
|
| Par |
|
| Number of |
|
| Par |
|
| Stock |
|
| Paid-In |
|
| Accumulated |
|
| Stockholders' |
| ||||||||
|
|
| Shares |
|
| Value |
|
| Shares |
|
| Value |
|
| Payable |
|
| Capital |
|
| Deficit |
|
| Equity |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
| Balance, December 31, 2019 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 49,086,326 |
|
| $ | 49,086 |
|
| $ | 24,480 |
|
| $ | 1,862,919 |
|
| $ | (842,813 | ) |
| $ | 1,093,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock issued for common stock payable |
|
| - |
|
|
| - |
|
|
| 450,000 |
|
|
| 450 |
|
|
| (24,480 | ) |
|
| 24,030 |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 38,928 |
|
|
| - |
|
|
| 38,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock issued upon exercise of warrants |
|
| - |
|
|
| - |
|
|
| 2,052,632 |
|
|
| 2,053 |
|
|
| - |
|
|
| (2,053 | ) |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss for the nine months ended September 30, 2020 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (549,219 | ) |
|
| (549,219 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, September 30, 2020 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 51,588,958 |
|
| $ | 51,589 |
|
| $ | - |
|
| $ | 1,923,824 |
|
| $ | (1,392,032 | ) |
| $ | 583,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For The Nine Months Ended September 30, 2019 |
| |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
| Balance, December 31, 2018 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 48,336,326 |
|
| $ | 48,336 |
|
| $ | - |
|
| $ | 1,715,726 |
|
| $ | (848,758 | ) |
| $ | 915,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 119,148 |
|
|
| - |
|
|
| 119,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss for the nine months ended September 30, 2019 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (11,165 | ) |
|
| (11,165 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, September 30, 2019 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 48,336,326 |
|
| $ | 48,336 |
|
| $ | - |
|
| $ | 1,834,874 |
|
| $ | (859,923 | ) |
| $ | 1,023,288 |
|
| See accompanying notes to the unaudited condensed consolidated financial statements |
| F-31 |
| Table of Contents |
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
(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 16,675,000 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 1,200,000 shares of the outstanding 17,785,000 shares of Company common stock, resulting in a change in control. Accordingly, the transaction was accounted for as a reverse acquisition in which AmpliTech, Inc. was deemed to be the accounting acquirer, and the operations of the Company were consolidated for accounting purposes. The capital balances have been retroactively adjusted to reflect the reverse acquisition.
AmpliTech designs, engineers and assembles microwave component based low noise amplifiers (“LNA”) that meet individual customer specifications. Application of the Company’s proprietary technology results in maximum frequency gain with minimal background noise distortion as required by each customer. The Company has both domestic and international customers in such industries as aerospace, governmental, defense and commercial satellite.
On September 12, 2019, AmpliTech Group Inc. acquired substantially all of the operating assets of Specialty Microwave Corporation (SMW), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and 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” (see Note 4).
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.
| F-32 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
The COVID-19 Pandemic
The novel strain of the coronavirus identified in China in late 2019 (COVID-19) has globally spread throughout other areas such as Asia, Europe, the Middle East, and North America and has resulted in authorities imposing, and businesses and individuals implementing, numerous unprecedented measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns. These measures have temporarily impacted our workforce and operations, and some of the operations of our customers, vendors, suppliers, and partners. Some of the countries in which we operate has been affected by the outbreak and taken measures to try to contain it. The ultimate impact and efficacy of government measures and potential future measures is currently unknown.
There is uncertainty regarding the business impacts from such measures and potential future measures. While we have been able to continue our operations through a combination of work-from-home and social distancing policies implemented to protect employees, these measures have resulted in reduced workforce availability. Restrictions on our access to customer facilities may impact our ability to meet customer demand this quarter and into next quarter and could effect on our financial condition and results of operations. Some of our customers may have experienced disruptions in their operations, but our RFQ (Request for Quote) activity remains strong which may result in delayed orders in the fourth quarter.
(2) Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements have been prepared using the accrual basis of accounting.
The accompanying unaudited interim condensed consolidated financial statements of AmpliTech Group, Inc. (“Group” or the “Company”) have been prepared by management in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for annual audited financial statements. In the opinion of management, all adjustments of a normal recurring nature, considered necessary for a fair presentation have been included.
| F-33 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes related thereto for the years ended December 31, 2019 and 2018 included in Form 10-K filed with the SEC.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All inter company accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods presented. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers deposits that can be redeemed on demand and investments that have original maturities of less than three months, when purchased, to be cash equivalents. As of September 30, 2020, the Company’s cash and cash equivalents were deposited in two financial institutions.
Accounts Receivable
Trade accounts receivable are recorded at the net invoice value and are not interest bearing.
The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience and a review of the current status of accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change in the future. No allowance has been recorded at September 30, 2020 and 2019, respectively.
| F-34 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
Inventories
Inventories, which consist primarily of raw materials, work in progress and finished goods, is stated at the lower of cost (first-in, first-out basis) or market (net realizable value).
Inventory quantities and related values are analyzed at the end of each fiscal quarter to determine those items that are slow moving and obsolete. An inventory reserve is recorded for those items determined to be slow moving with a corresponding charge to cost of goods sold. Inventory items that are determined obsolete are written off currently with a corresponding charge to cost of goods sold.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements.
Property and equipment are depreciated as follows:
| Description |
| Useful Life |
| Method |
| Office equipment |
| 7 years |
| Straight-line |
| Machinery and equipment |
| 5 to 7 years |
| Straight-line |
| Computer equipment |
| 3 to 7 years |
| Straight-line |
| Vehicles |
| 5 years |
| Straight-line |
Long-lived assets
Long lived assets, such as property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Circumstances which could trigger a review include, but are not limited to; significant decrease in the market price of the asset; significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount of fair value less costs to sell and would no longer be depreciated. The depreciable basis of assets that are impaired and continue in use is their respective fair values.
| F-35 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
Goodwill and Intangible Assets
Intangibles assets include goodwill, trademarks, intellectual property and customer base acquired through the asset purchase of Specialty Microwave. The Company accounts for Other Intangible Assets under the guidance of ASC 350, “Intangibles-Goodwill and Other.” Under the guidance, other intangible assets with definite lives are amortized over their estimated useful lives. Intangible assets with indefinite lives are tested annually for impairment. Goodwill is not amortized. We test goodwill balances for impairment annually at December 31 or whenever impairment indicators arise.
Leases
On January 1, 2019, we adopted ASU No. 2016-02, “Leases (Topic 842),” which requires leases with durations greater than twelve months to be recognized on the balance sheet. We adopted this standard using the modified retrospective approach with an effective date as of the beginning of January 2019. Prior year financial statements were not restated under the new standard. We lease property and equipment under finance and operating leases. For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the lease term. 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.
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.
| F-36 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
Determine the transaction price. Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns, rebates, discounts, and other adjustments. The estimates of variable consideration are based on historical payment experience, historical and projected sales data, and current contract terms. Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.
Allocate the transaction price to performance obligations in the contract. We typically do not have multiple performance obligations in our contracts with customers. As such, we generally recognize revenue upon transfer of the product to the customer’s control at contractually stated pricing.
Recognize revenue when or as we satisfy a performance obligation. We generally satisfy performance obligations at a point in time upon either shipment or delivery of goods, in accordance with the terms of each contract with the customer. We do not have significant service revenue.
Reserves are recorded as a reduction in net sales and are not considered material to our condensed consolidated statements of income for the nine months ended September 30, 2020.
Research and Development
Research and development expenditures are charged to operations as incurred. The major components of research and development costs include consultants, outside service, and supplies. Research and development costs for the nine months ended September 30, 2020 and 2019 were $ 41,083 and $ 48,262.
Income Taxes
The Company’s deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of certain assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At September 30, 2020, the Company had no material unrecognized tax benefits.
| F-37 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
Earnings Per Share
Basic earnings per share (“EPS”) are determined by dividing the net earnings by the weighted-average number of shares of common shares outstanding during the period. Diluted EPS is determined by dividing net earnings by the weighted average number of common shares used in the basic EPS calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding under the treasury stock method. As of September 30, 2020, there were 40,100,000 potentially dilutive shares that need to be considered as common share equivalents and because of the net loss, the effect of these potential common shares is anti-dilutive.
The computation of weighted average shares outstanding and the basic and diluted earnings per share consisted of the following:
|
|
| Net (Loss) Income |
|
| Shares |
|
| Per Share Amount |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
| For the three months ended September 30, 2020: |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
| |||
| Basic EPS |
| $ | 17,010 |
|
|
| 50,964,244 |
|
| $ | 0.00 | |
| Effect of dilutive stock options, warrants and series A shares |
|
|
|
|
|
| 40,100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted EPS |
| $ | 17,010 |
|
|
| 90,921,254 |
|
| $ | 0.00 | |
| For the three months ended September 30, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic EPS |
| $ | (138,384 | ) |
|
| 48,336,326 |
|
| $ | (0.00 | ) |
| Effect of dilutive stock options, warrants and series A shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted EPS |
| $ | (138,384 | ) |
|
| 48,336,326 |
|
| $ | (0.00 | ) |
|
|
| Net (Loss) Income |
|
| Shares |
|
| Per Share Amount |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
| For the nine months ended September 30, 2020: |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
| |||
| Basic EPS |
| $ | (549,219 | ) |
|
| 50,015,773 |
|
| $ | (0.01 | ) |
| Effect of dilutive stock options, warrants and series A shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted EPS |
| $ | (549,219 | ) |
|
| 50,015,773 |
|
| $ | (0.01 | ) |
| For the nine months ended September 30, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic EPS |
| $ | (11,165 | ) |
|
| 48,336,326 |
|
| $ | (0.00 | ) |
| Effect of dilutive stock options, warrants and series A shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted EPS |
| $ | (11,165 | ) |
|
| 48,336,326 |
|
| $ | (0.00 | ) |
| F-38 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
Fair Value of Assets and Liabilities
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined in the following categories as follows:
Level 1. Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Cash and cash equivalents are valued using inputs in Level 1.
Level 2. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3. Inputs that are both significant to the fair value measurement and unobservable. These inputs rely on management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. The unobservable inputs are developed based on the best information available in the circumstances and may include the Company’s own data.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employees required service period, which is generally the vesting period.
Concentration of Credit Risk
Financial instruments that potentially subject the company to concentration of credit risk consist primarily of accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses. Therefore, management does not believe significant credit risks exist at September 30, 2020.
| F-39 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
Recent Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the fair value measurements disclosures with the primary focus to improve effectiveness of disclosures in the notes to the financial statements that is most important to the users. The new guidance modifies the required disclosures related to the valuation techniques and inputs used, uncertainty in measurement, and changes in measurements applied. The adoption of this standard became effective for us on January 1,2020 and did not have a material impact on our consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. This ASU removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We are currently assessing the impact of this standard on our combined financial statements.
We do not expect the adoption of these or other recently issued accounting pronouncements to have a significant impact on our results of operation, financial position or cash flow.
(3) Revenues
The following table presents sales disaggregated based on geographic regions and for the three and nine months ended:
|
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||
|
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||
|
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Domestic sales |
| $ | 1,031,653 |
|
| $ | 505,844 |
|
| $ | 2,205,324 |
|
| $ | 1,283,720 |
|
| International sales |
|
| 119,079 |
|
|
| 203,052 |
|
|
| 362,055 |
|
|
| 734,702 |
|
| Total sales |
| $ | 1,150,732 |
|
| $ | 708,896 |
|
| $ | 2,567,379 |
|
| $ | 2,018,422 |
|
| F-40 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
(4) Acquisition of Specialty Microwave
On September 12, 2019, AmpliTech Group Inc. acquired substantially all of the operating assets of Specialty Microwave Corporation (SMW), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and 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%. Additional acquisition costs that were expensed at December 31, 2019 totaled approximately $77,000. The Company also entered a five- year lease on the 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.
As both companies are similar in nature, the acquisition will allow the combined resources and customer base to support more productivity and help in the development of new product lines. We started consolidating both companies for financial reporting purposes as of September 12, 2019.
The fair value of the purchase consideration issued to Specialty Microwave was allocated to the net tangible assets acquired. The Company accounted for the Acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $337,633. The excess of the aggregate fair value of the net tangible assets has been allocated to net intangible assets of $806,000.
The following table summarizes the allocation of the purchase price of the acquisition:
| Provisional purchase consideration at fair value: |
|
|
| |
| Cash |
| $ | 668,633 |
|
| Promissory Note |
|
| 475,000 |
|
| Total purchase price |
| $ | 1,143,633 |
|
|
|
|
|
|
|
| Allocation of purchase price: |
|
|
|
|
| Inventory |
| $ | 301,754 |
|
| Property and equipment |
|
| 46,156 |
|
| Goodwill |
|
| 120,136 |
|
| Trade name |
|
| 70,233 |
|
| Customer relationships |
|
| 412,860 |
|
| Intellectual property |
|
| 202,771 |
|
| Less: Customer Deposit |
|
| (10,277 | ) |
| Net assets acquired |
| $ | 1,143,633 |
|
The following table summarizes the Company’s consolidated results of operations for the period ended, as well as unaudited pro forma consolidated results of operations as though the acquisition had occurred on January 1, 2019. The proforma results for the nine months ended September 30, 2020 are not included in the table below because the operating results of Specialty Microwave were included in our consolidated statement of operations.
| F-41 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
|
|
| For The Nine Months Ended |
| |||||
|
|
| September 30, 2019 |
| |||||
|
|
| As Reported |
|
| Pro Forma |
| ||
|
|
|
|
|
|
|
| ||
| Net sales |
| $ | 1,309,526 |
|
| $ | 2,000,751 |
|
| Net income attributable to common shareholders |
|
| 127,219 |
|
|
| 229,581 |
|
|
|
|
|
|
|
|
|
|
|
| Earnings per common share, basic and diluted: |
|
|
|
|
|
|
|
|
| Basic |
| $ | 0.00 |
|
| $ | 0.00 |
|
| Diluted |
| $ | 0.00 |
|
| $ | 0.00 |
|
The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the Acquisition been completed as of January 1, 2019 or to project potential operating results as of any future date or for any future periods.
(5) Inventories
The inventory value at September 30, 2020 and December 31, 2019 were as follows:
|
|
| September 30, |
|
| December 31, |
| ||
|
|
| 2020 |
|
| 2019 |
| ||
| Raw Materials |
| $ | 427,974 |
|
| $ | 403,397 |
|
| Work-in Progress |
|
| 132,746 |
|
|
| 135,223 |
|
| Finished Goods |
|
| 125,990 |
|
|
| 124,510 |
|
| Engineering Models |
|
| 3,726 |
|
|
| 3,726 |
|
| Subtotal |
| $ | 690,436 |
|
| $ | 666,856 |
|
| Less: Reserve for Obsolescence |
|
| (88,000 | ) |
|
| (109,146 | ) |
| Total |
| $ | 602,436 |
|
| $ | 557,710 |
|
| F-42 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
(6) Property and Equipment
Property and Equipment consisted of the following at September 30, 2020 and December 31, 2019:
|
|
| September 30, |
|
| December 31, |
| ||
|
|
| 2020 |
|
| 2019 |
| ||
| Lab Equipment |
| $ | 861,914 |
|
| $ | 728,620 |
|
| Manufacturing Equipment |
|
| 25,000 |
|
|
| 25,000 |
|
| Automobiles |
|
| 19,527 |
|
|
| 19,527 |
|
| Furniture and Fixtures |
|
| 36,165 |
|
|
| 31,201 |
|
|
|
|
|
|
|
|
|
|
|
| Subtotal |
|
| 942,606 |
|
|
| 804,348 |
|
| Less: Accumulated Depreciation |
|
| (643,040 | ) |
|
| (606,238 | ) |
|
|
|
|
|
|
|
|
|
|
| Total |
| $ | 299,566 |
|
| $ | 198,110 |
|
Depreciation expense for the nine months ended September 30, 2020 and 2019 was $36,802 and $31,997, respectively.
(7) Intangible Assets
Goodwill
The goodwill is related to the acquisition of Specialty Microwave Corp. on September 12, 2019 and is primarily related to expected improvements and technology performance and functionality, as well sales growth from future product and service offerings and new customers, together with certain intangible assets that do not qualify for separate recognition. Goodwill is generally not amortizable for tax purposes and is not amortizable for financial statement purposes. As of September 30, 2020, goodwill is valued at $120,136.
Other Intangible Assets
Intangible assets with an estimated useful life of fifteen years consisted of the following at September 30, 2020:
|
|
| Gross Carrying |
|
| Accumulated |
|
|
|
| Weighted |
| |||||
|
|
| Amount |
|
| Amortization |
|
| Net |
|
| Average Life |
| ||||
| Trade name |
| $ | 70,233 |
|
| $ | - |
|
| $ | 70,233 |
|
| Indefinite |
| |
| Customer relationships |
|
| 412,860 |
|
|
| 28,957 |
|
|
| 383,903 |
|
|
| 14 |
|
| Intellectual Property |
|
| 202,771 |
|
|
| 14,354 |
|
|
| 188,417 |
|
|
| 14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| $ | 685,864 |
|
| $ | 43,311 |
|
| $ | 642,553 |
|
|
|
|
|
Amortization expense for the nine months ended September 30, 2020 and 2019 was $30,876 and $0, respectively.
Annual amortization of intangible assets are as follows:
| Remaining in 2020 |
| $ | 10,292 |
|
| 2021 |
|
| 41,042 |
|
| 2022 |
|
| 41,042 |
|
| 2023 |
|
| 41,042 |
|
| 2024 |
|
| 41,042 |
|
| Thereafter |
|
| 438,902 |
|
|
|
| $ | 572,320 |
|
| F-43 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
(8) Line of Credit
On September 12, 2019, AmpliTech entered a new business line of credit for $500,000 maturing on October 1, 2020. The line will be evaluated monthly on a borrowing base formula advancing 75% of accounts receivables aged less than 90 days and 50% of inventory raw materials costs. The interest rate shall be based upon the Wall Street Journal Prime Rate, plus 1%. As of September 30, 2020, the outstanding balance is $300,000, with accrued interest of $1,008.
(9) Leases
We adopted ASC 842 “Leases” using the modified retrospective approach, electing the practical expedient that allows us not to restate our comparative periods prior to the adoption of the standard on January 1, 2019. As such, the disclosures required under ASC 842 are not presented for periods before the date of adoption.
The following was included in our balance sheet as of September 30, 2020:
| Operating leases |
| As of September 30, 2020 |
| |
| Assets |
|
|
| |
| ROU operating lease assets |
| $ | 365,064 |
|
|
|
|
|
|
|
| Liabilities |
|
|
|
|
| Current portion of operating lease |
|
| 98,275 |
|
| Operating lease, net of current portion |
|
| 273,672 |
|
| Total operating lease liabilities |
| $ | 371,947 |
|
|
| ||||
| Finance leases |
|
|
|
|
| Assets |
|
|
|
|
| Property and equipment, gross |
| $ | 157,184 |
|
| Accumulated depreciation |
|
| (50,523 | ) |
| Property and equipment, net |
|
| 106,661 |
|
| Liabilities |
|
|
|
|
| Current portion of financing lease |
|
| 31,695 |
|
| Finance lease, net of current portion |
|
| 59,327 |
|
| Total operating lease liabilities |
| $ | 91,022 |
|
| F-44 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
The weighted average remaining lease term and weighted average discount rate at September 30, 2020 were as follows:
| Weighted average remaining lease term (years) |
| September 30, 2020 |
| |
| Operating leases |
|
| 3.75 |
|
| Finance leases |
|
| 3.75 |
|
|
|
|
|
| |
| Weighted average discount rate |
| September 30, 2020 |
| |
| Operating leases |
|
| 6.28 | % |
| Finance leases |
|
| 4.89 | % |
Finance Lease
The Company entered into a 60-month lease agreement to finance certain laboratory equipment in July 2018 with a purchase option of $1. As such, the Company has accounted for this transaction as a finance lease.
The following table reconciles future minimum finance lease payments to the discounted lease liability as of September 30, 2020:
| Remaining in 2020 |
| $ | 9,445 |
|
| 2021 |
|
| 37,778 |
|
| 2022 |
|
| 37,778 |
|
| 2023 |
|
| 18,889 |
|
| Total lease payments |
|
| 103,890 |
|
| Less imputed interest |
|
| (6,442 | ) |
| Less sales tax |
|
| (6,426 | ) |
| Total lease obligations |
|
| 91,022 |
|
| Less current obligations |
|
| (31,695 | ) |
| Long-term lease obligations |
| $ | 59,327 |
|
Operating Leases
On December 4, 2015, the Company entered into a new operating lease agreement to rent office space in Bohemia, NY. This five-year agreement commenced February 1, 2016 with an annual rent of $50,000 and 3.75% increases in each successive lease year.
On January 15, 2016, the Company entered into a five-year agreement to lease 2 copiers with and annual payment of $2,985.
On September 12, 2019, the Company entered into a new operating lease agreement to rent office space in Ronkonkoma, NY. This five-year agreement commenced on September 12, 2019 with an annual rent of $90,000 and 3% increase in each successive lease year beginning in 2021. The Company has an option to buy the property during the first two years of the lease for $1,200,000 and then at fair market value for the remainder of the lease term.
| F-45 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
On November 27, 2019, the Company entered a 39-month agreement to lease an automobile with a monthly payment of $420
The following table reconciles future minimum operating lease payments to the discounted lease liability as of September 30, 2020:
| 2020 |
| $ | 39,086 |
|
| 2021 |
|
| 102,849 |
|
| 2022 |
|
| 100,521 |
|
| 2023 |
|
| 98,765 |
|
| 2024 |
|
| 75,972 |
|
| Total lease payments |
|
| 417,193 |
|
| Less imputed interest |
|
| (45,246 | ) |
| Total lease obligations |
|
| 371,947 |
|
| Less current obligations |
|
| (98,275 | ) |
| Long-term lease obligations |
| $ | 273,672 |
|
(10) Notes Payable
Promissory Note:
On September 12, 2019, AmpliTech Group Inc. acquired substantially all of the operating assets of Specialty Microwave Corporation (SMW), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and 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%. Beginning November 1, 2019, payment of principal and interest shall be due payable in fifty-nine (59) monthly payments of $9,213 with a final payment due October 1, 2024 of $9,203. As of September 30, 2020, the balance of this promissory note was $398,439. Principal payments of $56,107 along with interest expense of $17,604 was paid during the nine months ended September 30, 2020. The promissory note is secured by certain assets of the Company.
Loan Payable:
On September 12, 2019, the Company entered a $1,000,000 seven-year term loan with amortization based on a ten- year repayment schedule. The loan bears interest at a fixed rate of 6.75% with a monthly repayment amount of $11,533. As of September 30, 2020, the balance of the loan was $928,347 and interest expense paid was $49,772. This loan is collateralized by all Company assets.
| F-46 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
On April 20, 2020, the Company entered into a Paycheck Protection Program Promissory Note (“PPP Note”) in the principal amount of $232,200 (“PPP Loan”) from BNB Bank (“PPP Loan Lender”). The PPP Loan was obtained pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) administered by the US Small Business Administration (“SBA”). The PPP Loan was disbursed by the PPP Loan Lender on April 20, 2020 (the “Disbursement Date”). The PPP Loan bears an interest at 1.00% per annum and will mature two years from the Disbursement Date. The Company plans to apply for PPP Loan forgiveness. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used by the Company for 2020 payroll costs, mortgage interest payments, rent and utilities.
This has helped to offset some of the adverse effects of this pandemic and allowed us to serve our customers at a reduced capacity but without experiencing any cancellation of our open orders.
In addition, on September 12, 2019, the Company was approved for a $250,000 equipment leasing facility. The Company has borrowed against the leasing facility as follows:
|
| · | On December 20, 2019, the Company borrowed $58,192 to be paid over a three-year term with monthly payments of $ 1,736 at an interest rate of 5.26%. The balance as of September 30, 2020 was $42,709. |
|
| · | On May 14, 2020, the Company borrowed $27,494 to be paid over a three-year term with monthly payments of $815 at an interest rate of 4.268%. The balance as of September 30, 2020 was $23,804. |
|
| · | On June 10, 2020, the Company borrowed $41,015 to be paid over a three-year term with monthly payments of $1,216 at an interest rate of 4.278%. The balance as of September 30, 2020 was $36,589. |
Future principal payments over the term of the loans as of September 30, 2020 are as follows:
|
|
| Payments |
| |
| 2020 |
|
| 75,777 |
|
| 2021 |
|
| 364,123 |
|
| 2022 |
|
| 273,770 |
|
| 2023 |
|
| 201,729 |
|
| Thereafter |
|
| 746,689 |
|
| Total remaining payments |
| $ | 1,662,088 |
|
| F-47 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
(11) Stockholders’ Equity
Preferred Stock
On July 10, 2013, the board of directors of the company approved a certificate of amendment to the articles of incorporation and changed the authorized capital stock of the Company to include and authorize 500,000 shares of Preferred Stock, par value $0.001 per share.
In July 2013, the Board of Directors of the Company designated 140,000 shares of Preferred Stock as Series A Convertible Preferred Stock (or “Series A”). Furthermore, each share of Series A is convertible into 100 shares of common stock at any time after issuance and the holder of each share of Series A is entitled to 100 votes when the vote of holders of the Company’s common stock is sought. In January 2015, the Board of Directors of the Company increased the number of Series A designated from 140,000 to 401,000. There are currently 1,000 shares of Series A outstanding.
In April 2015, the Board of Directors of the Company designated 75,000 shares of Preferred Stock as Series B Convertible Preferred Stock (or “Series B”). The Series B shares are convertible into common stock at a conversion rate of one Series B share for 289 common shares. In addition, a holder of Series B Preferred Stock shall not be entitled to have any voting rights and shall hold a liquidation preference junior to a holder of Series A shares and pari passu with common shareholders. There are currently no shares of Series B outstanding.
Common Stock:
The Company originally authorized 50,000,000 shares of common stock with a par value of $0.001. Effective May 20, 2014, the Company increased its authorized shares of common stock from 50,000,000 to 500,000,000.
On July 9, 2020, Maxim was issued 450,000 shares of common stock in exchange for common stock payable.
On July 28, 2020, Wayne Homschek elected to exercise 3,000,000 of his cashless warrants and 2,052,632 of common stock was issued.
As of September 30, 2020, and December 31, 2019, the Company had 51,588,958 and 49,086,326 shares of common stock issued and outstanding.
| F-48 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
On October 15, 2019, the Company engaged Maxim Group LLC (“Maxim”) as its financial advisor to assist the Company in growth strategy to the investment community with an ultimate goal of a potential up-list and capital raise on NASDAQ.
As consideration for Maxim’s services, Maxim shall be entitled to receive, and the Company agrees to pay Maxim, the following compensation:
(a) The Company will issue to Maxim or its designees 2,000,000 shares of the Company’s Common Stock (“Common Stock”) based on the following schedule:
|
| i. | 550,000 restricted shares of Common Stock upon the execution of the Agreement implying a price per share of $0.10. These shares were valued on October 15, 2019 at $0.054 with a value of $29,920. As of September 30,2020, the full amount of $29,920 was expensed as consulting fees and the shares were issued on January 13, 2020. |
|
|
|
|
|
| ii. | $54,000 payable in 450,000 restricted shares of Common Stock six months from the date of the Agreement implying a price per shares of $0.12. These shares were valued on October 15, 2019 at a price of $0.054 with a value of $24,480. As of September 30, 2020, $24,480 was expensed as consulting fees and the shares were issued on July 9, 2020. |
|
|
|
|
|
| iii. | 1,000,000 restricted shares of Common Stock upon an up listing of the Company’s Common Stock to a national exchange. |
Options:
During 2014, the Company granted the chief executive officer of the Company an immediately exercisable option to purchase an aggregate of 400,000 shares of Series A at an exercise price of $0.0206 per share. There is no expiration date for this option and the related expense has been recorded in prior years.
Warrants:
On April 25, 2019, Wayne Homschek joined the Board of Directors as an independent Director who aided in corporate strategy, financing and investor relations. He was paid $5,000 per month for one year and receive a warrant, exercisable into 3,000,000 shares of common stock at an exercise price of $0.03 per share. As per the agreement, 1,500,000 warrants vested in six months and the remaining balance of 1,500,000 vested one year later. The following table summarizes the warrants outstanding of the Company for the nine months ended September 30, 2020:
|
|
| Number of |
|
| Weighted Average |
| ||
|
|
| Warrants |
|
| Exercise Price ($) |
| ||
| Outstanding at December 31,2019 |
|
| 3,000,000 |
|
|
| .03 |
|
| Granted |
|
| - |
|
|
| - |
|
| Exercised |
|
| (3,000,000 | ) |
|
| (.03 | ) |
| Expired |
|
| - |
|
|
| - |
|
| Outstanding at September 30, 2020 |
|
| 0 |
|
|
| 0 |
|
| F-49 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
The Company has calculated the estimated fair market value of these warrant sat $142,950, using the Black-Scholes model and the following assumptions: expected term 5.75 years, stock price $0.05, exercise price $0.03, 153.48% volatility, 2.35% risk free rate, and no forfeiture rate.
The Company recognized stock-based compensation of $38,928 and $119,148 for the nine months ended September 30, 2020 and 2019, respectively.
On July 25, 2020, Wayne Homschek was terminated as a director of Amplitech Group, Inc. The Board of Directors of the Company determined that the monthly compensation payable to Mr. Homschek was no longer financially viable. Prior to such termination, the Company had no disagreements with Mr. Homschek regarding the reporting or operations of the Company. Upon Mr. Homshek's termination, the Company accelerated the vesting period of his warrants. On July 28, 2020, Mr. Homschek exercised 3,000,000 of his cashless warrants for 2,052,632 of common stock.
(12) Commitments and Contingencies:
On September 21, 2020, the Company engaged a service provider for a fee up to $200,000 to be paid in installments based upon the occurrence of certain events. The Company also agreed to issue 2,000,000 shares of common stock to service providers.
| F-50 |
| Table of Contents |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For The Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
(13) Subsequent events
In accordance with ASC 855-10, Company management reviewed all material events through the date of this report.
On October 14, 2020, the Company filed a preliminary information statement on Schedule 14C highlighting the following:
(1) the authorization of the Company’s Board of Directors to effect a reverse stock split of the Company’s common stock, in connection with a potential listing on a national stock exchange in a ratio to be determined by the Board based on market conditions and the Company’s trading price at the time of such reverse split in the range of 1:100 to 1:200, whereby every 100-200 shares of the authorized, issued and outstanding common stock shall be combined into one (1) share of authorized, issued and outstanding common stock;
(2) to amend and restate the Company’s articles of incorporation to keep the authorized shares of Common Stock at 500,000,000 and set the authorized shares of blank check preferred stock at 1,000,000;
(3) to amend and restate the Company’s Bylaws
(4) to amend and restate the certificate of designation of preferences, rights and limitations of the Series A convertible preferred stock in order to restate the designation of 401,000 shares of blank check Preferred Stock as Series A Preferred and refile the rights thereof;
(5) to withdraw the Series B preferred stock designation collectively with the Amended Articles, the Amended Bylaws and the Amended Certificate, and;
(6) to adopt the 2020 Equity Incentive Plan.
As of the filing of this report, the 14C is still in the approval process and not effective.
| F-51 |
| Table of Contents |
______ Units
Each Unit Consisting of
One Share of Common Stock and
One Warrant to Purchase One Share of Common Stock
_____________________
PROSPECTUS
_____________________
| Sole Book-Running Manager |
|
|
| Maxim Group LLC |
, 2020
Through and including , 2020 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
| 56 |
| Table of Contents |
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth an itemization of the various expenses, all of which we will pay, in connection with the issuance and distribution of the securities being registered. All of the amounts shown are estimated except the SEC Registration Fee and the FINRA filing fee.
| SEC Registration Fee |
| $ | 2,065 |
|
| Nasdaq listing fees |
|
| 50,000 |
|
| FINRA filing fee |
|
| 10,000 |
|
| Fees of transfer agent and warrant agent |
|
| 10,000 |
|
| Accounting fees |
|
| 60,000 |
|
| Legal fees and expenses |
|
| 300,000 |
|
| Miscellaneous |
|
| 5,000 |
|
| Total |
| $ | 437,065 |
|
Item 14. Indemnification of Directors and Officers
Nevada law provides that a Nevada corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the corporation (i.e., a “non-derivative proceeding”), by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he or she:
|
| • | Is not liable under Section 78.138 of the Nevada Revised Statutes for breach of his or her fiduciary duties to the corporation; or |
|
| • | Acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. |
In addition, a Nevada corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor (i.e., a “derivative proceeding”), by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him or her in connection with the defense or settlement of the action or suit if he:
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| • | Is not liable under Section 78.138 of the Nevada Revised Statute for breach of his or her fiduciary duties to the corporation; or |
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| • | Acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation. |
Under Nevada law, indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
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| Table of Contents |
To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any non-derivative proceeding or any derivative proceeding, or in defense of any claim, issue or matter therein, the corporation is obligated to indemnify him or her against expenses, including attorneys’ fees, actually and reasonably incurred in connection with the defense.
Further, Nevada law permits a Nevada corporation to purchase and maintain insurance or to make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him or her and liability and expenses incurred by him or her in his or her capacity as a director, officer, employee or agent, or arising out of his or her status as such, whether or not the corporation has the authority to indemnify him or her against such liability and expenses.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
The Company plans to enter into an underwriting agreement in connection with this offering that provides that the underwriter is obligated, under some circumstances, to indemnify the Company’s directors, officers and controlling persons against specified liabilities, including liabilities under the Securities Act.
Item 15. Recent Sales of Unregistered Securities
In the three years preceding the filing of this registration statement, we have issued the following securities that were not registered under the Securities Act. The information provided below does not give effect to the proposed reverse stock split described in the accompanying prospectus.
On February 14, 2018, the Company entered into an advisory agreement to assist in product sales and distribution in Asia and the Middle East. The advisor was paid compensation of a total of 2.2 million shares of restricted common stock valued at the closing market price on the date the shares were issued. The first installment of 500,000 shares was issued on February 14, 2018 at $0.035 and the second installment of 1,700,000 shares on April 9, 2018 at $0.04. The total value of shares issued for services aggregated to $85,950. The issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act.
On April 25, 2019, the Company issued a former director warrants exercisable into 3,000,000 shares of common stock at an exercise price of $0.03 per share. 1,500,000 warrants vested six months after issuance and the remaining balance of 1,500,000 vested one year after issuance. The issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act.
On July 2, 2019, the Company entered an engagement for strategic intellectual property consulting services with ipCapital Group (“ipCG”), to assist in the formulation and execution of Amplitech’s intellectual property (“IP”) strategy around its proprietary trade secrets, knowhow and technology to formulate a comprehensive “ipStory”. The consideration paid to ipCG is $30,000, of which ipCG has agreed to accept 200,000 shares of restricted common stock upon completion of the project. These shares were issued on October 15, 2019 at a value of $14,000. The issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act.
On October 15, 2019, the Company engaged Maxim Group LLC (“Maxim”) as its financial advisor to assist the Company in growth strategy. As consideration for Maxim’s services, Maxim received 550,000 shares of the Company’s common stock on October 15, 2019 and 450,000 shares of the Company’s common stock on April 15, 2020. These issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act.
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| Table of Contents |
Item 16. Exhibits and Financial Statement Schedules
The following exhibits to this registration statement included in the Index to Exhibits are incorporated by reference.
INDEX TO EXHIBITS
| Exhibit No. |
| Description |
| 1.1 | Form of Underwriting Agreement** | |
| 3.1 |
| Amended and Restated Articles of Incorporation of AmpliTech Group, Inc.** |
| 3.2 |
| Amended and Restated Bylaws of AmpliTech Group, Inc.** |
| 3.3 |
| Amended and Restated Series A Convertible Preferred Stock Certificate of Designation** |
| 4.1 | Form of Common Stock Purchase Warrant** | |
| 4.2 |
| Form of Warrant Agent Agreement** |
| 4.3 |
| Form of Underwriter’s Warrant** |
| 5.1 |
| Form of Opinion of Sichenzia Ross Ference LLP** |
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| Paycheck Protection Program Promissory Note dated April 20, 2020 * | |
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| Business Loan Agreement with BNB Bank, dated November 20, 2020* | |
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| Promissory Note issued to BNB Bank, dated November 20, 2020* | |
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| 23.2 |
| Consent of Sichenzia Ross Ference LLP (contained in its form of opinion filed as Exhibit 5.1 hereto)** |
| 101. INS |
| XBRL Instance Document |
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| 101. SCH |
| XBRL Taxonomy Extension Schema Document |
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| 101. CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
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| 101. DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
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| 101. LAB |
| XBRL Taxonomy Extension Label Linkbase Document |
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| 101. PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed herewith
** To be filed by amendment
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| Table of Contents |
Item 17. Undertakings
| (a) | The undersigned registrant hereby undertakes: |
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| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
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| (i) | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
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| (ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; |
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| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
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| (2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
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| (4) | That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
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| (5) | That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
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| (i) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
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| (ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
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| (iii) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
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| (iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
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| (b) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Bohemia, State of New York, on December 10, 2020.
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| AMPLITECH GROUP, INC. |
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| /s/ Fawad Maqbool |
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| Fawad Maqbool |
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| President and Chief Executive Officer |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| Signature |
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| Date |
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| /s/ Fawad Maqbool |
| President, Chief Executive Officer and Chairman of the Board of Directors |
| December 10, 2020 |
| Fawad Maqbool |
| (Principal Executive Officer) |
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| /s/ Louisa Sanfratello |
| Chief Financial Officer and Director |
| December 10, 2020 |
| Louisa Sanfratello |
| (Principal Financial Officer and |
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| II-5 |
EXHIBIT 10.7
| SBA Loan# | 9142817106 |
| SBA Loan Name | Amplitech, Inc. |
| Date | 4/20/20 |
| Loan Amount | $232,200.00 |
| Interest Rate | One (1%) Percent Per Annum; Fixed |
| Borrower | Amplitech, Inc. |
| Lender | BNB Bank |
| 1. | PROMISE TO PAY: |
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| In return for the Loan, Borrower promises to pay to the order of Lender the amount of two hundred thirty-two thousand two hundred and 00/100 Dollars, plus interest on the unpaid principal balance, and all other amounts required by this Note. |
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| 2. | DEFINITIONS: |
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| “Loan” means the loan evidenced by this Note. |
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| “Loan Documents” means the documents related to this loan signed by Borrower, including the Application for the Loan. |
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| “SBA” means the Small Business Administration, an Agency ofthe United State of America. |
| 3. | PAYMENTTERMS: |
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| Borrower must make all payments at the place Lender designates. The payment terms for this Note are: |
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| Initial Deferment Period: No payments are due on this loan for 6 months from the date of first disbursement of this loan. Interest will continue to accrue during the deferment period. |
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| Loan Forgiveness: Borrower may apply to Lender for forgiveness of the amount due on this loan in an amount equal to the sum of the following costs incurred by Borrower during the 8-week period beginning on the date of first disbursement of this loan: |
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| a. | Payroll costs |
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| b. | Any payment of interest on a covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation) |
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| c. | Any payment on a covered rent obligation |
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| d. | Any covered utility payment |
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| The amount of loan forgiveness shall be calculated (and may be reduced) in accordance with the requirements of the Paycheck Protection Program, including the provisions of Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) {P.L. 116-136). Not more than 25% of the amount forgiven can be attributable to non-payroll costs. If the Borrower has received an EIDL advance in any amount, that amount shall be subtracted from the loan forgiveness amount. | |
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| Maturity: This Note will mature two years from date of first disbursement of this loan. | |
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| Repayment Terms: The interest rate on this Note is one percent per year. The interest rate is fixed and will not be changed during the life of the loan. | |
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| Other Repayment Terms: At the end of the 6-month deferment period the Borrower shall pay all accrued and unpaid interest outstanding that is not subject to forgiveness by the SBA. The unpaid principal balance of this Note outstanding at the end of the deferment period shall be payable in eighteen (18) equal consecutive installments of principal and interest payable (based upon an 18 month amortization schedule) commencing on the 7 month anniversary of the Note date to and including the Maturity date. | |
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| Lender will apply each installment payment first to pay interest accrued to the day Lender received the payment, then to bring principal current, and will apply any remaining balance to reduce principal. | |
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| Loan Prepayment: Notwithstanding any provision in this Note to the contrary: | |
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| Borrower may prepay this Note at any time without penalty. Borrower may prepay 20 percent or less of the unpaid principal balance at any time without notice. If Borrower prepays more than 20 percent and the Loan has been sold on the secondary market, Borrower must: a. Give Lender written notice; b. Pay all accrued interest; and c. If the prepayment is received less than 21 days from the date Lender received the notice, pay an amount equal to 21 days interest from the date lender received the notice, less any interest accrued during the 21 days and paid under b. of this paragraph. If Borrower does not prepay within 30 days from the date Lender received the notice, Borrower must give Lender a new notice. | |
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| Non-Recourse. Lender and SBA shall have no recourse against any individual shareholder, member or partner of Borrower for non-payment of the loan, except to the extent that such shareholder, member or partner uses the loan proceeds for an unauthorized purpose. | |
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| 4. | DEFAULT: |
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| Borrower is in default under this Note if Borrower does not make a payment when due under this Note, or if Borrower: |
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| A. | Fails to do anything required by this Note and other Loan Documents; |
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| B. | Defaults on any other loan with Lender; |
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| C. | Does not disclose, or anyone acting on their behalf does not disclose, any material fact to Lender or SBA; |
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| D. | Makes, or anyone acting on their behalf makes, a materially false or misleading representation to Lender or SBA; |
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| E. | Defaults on any loan or agreement with another creditor, if Lender believes the default may materially affect Borrower’s ability to pay this Note; |
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| F. | Fails to pay any taxes when due; |
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| G. | Becomes the subject of a proceeding under any bankruptcy or insolvency law; |
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| H. | Has a receiver or liquidator appointed for any part of their business or property; |
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| I. | Makes an assignment for the benefit of creditors; |
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| J. | Has any adverse change in financial condition or business operation that Lender believes may materially affect Borrower’s ability to pay this Note; |
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| K. | Reorganizes, merges, consolidates, or otherwise changes ownership or business structure without Lender’s prior written consent; or |
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| L. | Becomes the subject of a civil or criminal action that Lender believes may materially affect Borrower’s ability to pay this Note. |
| 5. | LENDER’S RIGHTS IF THERE IS A DEFAULT: |
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| Without notice or demand and without giving up any of its rights, Lender may: |
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| A. | Require immediate payment of all amounts owing under this Note; |
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| B. | Collect all amounts owing from any Borrower; |
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| C. | File suit and obtain judgment; or |
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| D. | Exercise any rights of set off. |
| 6. | LENDER’S GENERAL POWERS: |
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| Without notice and without Borrower’s consent, Lender may: |
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| A. | Incur expenses to collect amounts due under this Note, enforce the terms of this Note or any other Loan Document. Among other things, the expenses may include payments and reasonable attorney’s fees and costs. If Lender incurs such expenses, it may demand immediate repayment from Borrower or add the expenses to the principal balance; |
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| B. | Release anyone obligated to pay this Note; and |
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| C. | Take any action necessary to collect amounts owing on this Note. |
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| 7. | WHEN FEDERAL LAW APPLIES: |
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| When SBA is the holder, this Note will be interpreted and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Note, Borrower may not claim or assert against SBA any local or state law to deny any obligation, defeat any claim of SBA, or preempt federal law. |
| 8. | SUCCESSORS AND ASSIGNS: |
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| Under this Note, Borrower include the successors of each, and Lender includes its successors and assigns. |
| 9. | GENERAL PROVISIONS: |
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| A. | All individuals and entities signing this Note are jointly and severally liable. |
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| B. | Borrower waives all suretyship defenses. |
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| C. | Borrower must sign all documents necessary at any time to comply with the Loan Documents. |
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| D. | Lender may exercise any of its rights separately or together, as many times and in any order it chooses. Lender may delay or forgo enforcing any of its rights without giving up any of them. |
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| E. | Borrower may not use an oral statement of Lender or SBA to contradict or alter the written terms of this Note. |
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| F. | If any part of this Note is unenforceable, all other parts remain in effect. |
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| G. | To the extent allowed by law, Borrower waives all demands and notices in connection with this Note, including presentment, demand, protest, and notice of dishonor. |
| 10. | STATE SPECIFIC PROVISIONS: |
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| This Note may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. One or more parties may transmit his/her signature on this Note via telecopy, facsimile or other form of electronic transmission, and that such signature shall be binding and have the same effect as a manual signature upon the original. It is agreed that in any legal proceeding, a copy of this Note kept in Lender’s course of business may be admitted into evidence as an original. |
| 11. | REPRESENTATIONS AND WARRANTIES: |
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| The Borrower warrants and represents that: |
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| 1. | This Loan is hereby made pursuant to the SBA Paycheck Protection Program; |
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| 2. | Borrower was in operation on February 15, 2020; |
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| 3. | Borrower had employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on a Form 1099-MISC; |
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| 4. | the current economic uncertainty makes this loan request necessary to support the ongoing operations of the Borrower; |
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| 5. | the funds will be used to retain workers and maintain payroll (as defined in the CARES Act and SBA’s IFR), costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums, make mortgage interest payments (but not mortgage prepayments or principal payments), rent payments, utility payments, interest payments on any other debt obligations that were incurred before February 15, 2020 and/or refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020; |
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| 6. | Borrower understandings that if the funds are knowingly used for unauthorized purposes, the federal government may hold the Borrower legally liable such as for charges of fraud; |
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| 7. | documentation verifying the number of full-time equivalent employees on payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight-week period following this loan will be provided to the Lender by the Borrower; |
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| 8. | during the period beginning on February 15, 2020 and ending on December 31, 2020, the Borrower has not and will not receive another loan under the Payroll Protection Program; |
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| 9. | the information provided in the application and the information provided in all supporting documents and forms as provided to the Lender was and remains true and accurate in all material respects; |
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| 10. | Borrower understands that knowingly making a false statement to obtain a guaranteed loan from the US Small Business Administration (“SBA”) is punishable under the law, including under 18 USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 USC 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a federally insured institution, under 18 USC 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000, and Borrower understands that if the Borrower’s shareholders, members, or partners use the Loan proceeds for unauthorized purposes, SBA will have recourse against the shareholder(s), member(s), or partner(s) for the unauthorized use; |
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| 11. | Borrower acknowledges that the Lender will confirm the eligible loan amount using tax documents the Borrower has submitted; |
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| 12. | the tax documents are identical to those submitted to the Internal Revenue Service; and |
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| 13. | Borrower understands, acknowledges, and agrees that the Lender can share the tax information with SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews. |
<Signatures on the next page>
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| 12. | BORROWER’S NAME(S) AND SIGNATURE(S): |
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| By signing below, each individual or entity becomes obligated under this Note as Borrower. |
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| When SBA is the holder, this Note will be interpreted and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Note, Borrower may not claim or assert against SBA any local or state law to deny any obligation, defeat any claim of SBA, or preempt federal law. |
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| The execution and delivery of this Note has been authorized by all necessary action of the governing body of the Borrower. |
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| By accepting and electronically signing this document, the undersigned agrees that the electronic signature or copy of a signed signature has the same legal validity and effect as an original handwritten signature. This Agreement and any and all other documents relative to the same shall be treated as transferable record under the ESIGN Act, Uniform Electronic Transactions Act and Article 3 of the Uniform Commercial Code. | ||
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| By: | Fawad Maqbool |
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| Printed Name: |
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| Title: | President |
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| Date signed: 4/18/2020 | 11: 31 PM PDT |
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| 2200 Montauk Highway P.O. Box 3005 Bridgehampton, NY 11932 631.537.1000 www.bnbbank.com |
SBA Paycheck Protection Program Note Addendum
By accepting and using the Paycheck Protection Program Loan proceeds the Borrower agrees to and acknowledges receipt of the following terms and conditions:
USA Patriot Act Notice: To help the U.S. government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each Applicant (“you”, “your’’) that opens a loan account. This means that when an Applicant (defined below) opens a loan account, BNB BANK (“Bank”, “we”, “us”) will ask for the business name, business address, taxpayer identifying number and other information that will allow us to identify the Applicant, such as organizational documents. For some business entities we may need to ask for identifying information and documentation relating to certain individuals associated with the business or organization, including such individual’s name, address, date of birth and other information that will help us identify such person. For example, we may also ask to see such person’s driver’s license or other official documents to identify such person.
ECOA Notice: The federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract), because all or part of the applicant’s income derives from any public assistance program, or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning this creditor is: Federal Reserve Consumer Help Center, P.O. Box 1200 Minneapolis, MN 55480.
New York Human Rights Law Notice: The New York Human Rights Law also prohibits creditors from discriminating in the granting, withholding, extending or renewing, or in the fixing of the rates, terms or conditions of, any form of credit, on the basis of race, creed, color, national origin, sexual orientation, military status, age, sex, marital status, disability, or familial status.
Ownership of Applicant. If one or more Applicants is a corporation, limited liability company or any other type of business entity (each, an “Entity”), Applicant agrees to provide Bank with a certification of beneficial owners in form and substance acceptable to Bank for each such Entity that is executed by the principals of each Entity in connection with this loan application and any time an updated version may be requested by Bank from time to time (“Certification of Beneficial Owners”). The Applicant represents and warrants, as of the date of this loan application and as of the date on which each updated Certification of Beneficial Owners is provided to Bank, that the information in the Certification of Beneficial Owners is true, complete and correct. You agree to provide updated versions of the Certification of Beneficial Owners promptly following each change in the beneficial ownership or the controlling party of Applicant. Further, from time to time Bank may be required to verify the continued accuracy of the information provided in the Certification of Beneficial Owners. The Applicant agrees to provide written confirmation of the accuracy of the information in a then current Certification of Beneficial Owners or deliver a new Certification of Beneficial Owners in form and substance acceptable to Bank when requested by Bank.
The Applicant further agrees to provide such other information and documentation as may reasonably be requested by Bank from time to time for purposes of compliance by the Bank with applicable laws and regulations (including, without limitation, the USA Patriot Act and anti-money laundering rules and regulations) and any policy or procedure implemented by Bank to comply therewith. Bank is authorized to make all inquiries it deems necessary to verify accuracy of the information submitted in your loan application and to determine the Applicant’s creditworthiness, and to share any information provided to Bank by or about any Applicant(s) with any third party that performs services for Bank in connection with this application or the loan or to whom this application or any loan to the Applicant may be transferred.
Deposit Account: Sensitive Enterprises. Applicant understands and agrees that, if the loan application is approved, it will be required to establish and maintain a deposit account at the Bank during the term of the loan. The Bank’s policy requires that Applicants whose business includes participating in certain sensitive enterprises, such as check cashing, money transfer, gambling and marijuana/cannabis production and sales must be evaluated carefully before a deposit or loan account is established.
Notice for Denial: If you have applied for credit and your request is denied you have the right to a written statement of the specific reasons for denial. To obtain the statement, you must write to us within 60 days from the date you are notified of our decision at: 898 Veterans Memorial Highway, Suite 560 Hauppauge, NY 11788] or call us at: (631) 537-1000. We will send you a written statement of the reason(s) for denial within 30 days of receiving your request for the statement.
Indemnity. You agree that the Bank shall be entitled to rely on the accuracy and completeness of all representations and all the information provided by you and you, on behalf of the Applicant, hereby indemnify the Bank, its affiliates and their respective directors, officers, employees and agents (each an “Indemnified Party”) from, and hold each Indemnified Party harmless from and against, all actions, causes of action, claims, damages, liabilities and expenses (including reasonable attorneys’ fees) of any nature or kind (including those by third parties) arising out of, or related to, any violations or inaccuracies of the undertakings made pursuant to these Terms and Conditions.
Bank Property. You agree that the loan application, including all materials submitted by Applicant in connection with it, is the property of the Bank, whether or not the application is approved or a loan is originated.
Agreement for Electronic Delivery and Signature (“Esign Agreement” ). Borrower hereby agrees to receive information from and provide information to Bank electronically pursuant to the terms and conditions of this E-Sign Agreement. This E-Sign Agreement contains important information and disclosures about your rights and obligations in connection with your application for a loan from Bank. If you choose not to agree to the terms and conditions of this E-Sign Agreement, you should not utilize the proceeds of your loan and advise us accordingly. Please read and retain a copy of this E-Sign Agreement for your records.
By providing telephone number(s) to the Bank, our affiliates or agents, whether in the application or separately at a later time, you authorize the Bank, and/or our affiliates and agents to contact you regarding your loan account(s) with us at the telephone numbers provided using any means, including but not limited to placing calls using an automated dialing system to cell phone or VoIP numbers or leaving pre-recorded messages or sending text messages. You agree that you may incur charges for any such calls or text messages. You further agree that any phone call with us may be monitored or recorded by us for quality control and other purposes. Also, by providing an e-mail address, Borrower consents and agrees to receive electronic mail from the Bank, our affiliates and agents.
Electronic Agreement - By accepting and using the Paycheck Protection Program Loan proceeds the Borrower:
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| 1) | Certifies that Borrower has permission to apply jointly and/or on behalf of all persons who qualify as a Borrower in the loan application and that all such persons are aware of and have authorized the submission of the loan application. If you are agreeing to the terms and conditions of this E-Sign Agreement on behalf of an Entity, you certify that you have been duly appointed and authorized to take action on behalf of such Entity, whether by a resolution or other similar and adequate means by its owners, shareholders, board of directors, members, or any other persons required to authorize you to act on its behalf to: (i) submit and receive information; and (ii) execute an application and all other agreements applicable to your loan; and (iii) bind the Entity to the obligations as set forth in or presented to you by electronic means through this web site or by other electronic means. |
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| 2) | Agrees on behalf of the Borrower, either personally or for an Entity on whose behalf you are acting, to this E-Sign Agreement. |
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| 3) | Agrees to submit information to, receive information from, and enter into agreements with the Bank electronically in accordance with the requirements of the federal Electronic Signatures In Global and National Commerce Act and any applicable requirements of any governmental agency or authority related to your loan obligation. |
EXHIBIT 10.8
DISTRIBUTION AGREEMENT
THIS DISTRIBUTOR AGREEMENT (this "Agreement") is dated as of November 9, 2016 (the "Effective Date"), by and between AmpliTech Inc., a New York corporation ("Manufacturer"), and East Coast Microwave Sales & Distribution, LLC. a Massachusetts corporation ("ECM").
RECITALS
WHEREAS, Manufacturer is a global supplier of microwave and millimeter-wave electronic products to customers in the aerospace, medical, military, telecommunications and other markets;
WHEREAS, ECM is a distributor of radio frequency (RF) and microwave coaxial connectors, cable assemblies and components, specializing in distributing coaxial connectors to commercial and military markets;
WHEREAS, Manufacturer desires to engage ECM to market and sell Manufacturer's products to customers as set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
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| a. | Appointment. Manufacturer appoints ECM on an exclusive basis to serve during the term of this Agreement as an authorized distributor of the Products within the Territory (as those terms are defined below), and ECM accepts such appointment. Manufacturer will be entitled to market, sell and distribute the Products within the Territory either directly or through other authorized distributors or dealers. However, Manufacturer will inform ECM of the appointment of any other authorized distributor of the Products within the Territory within 30 days of such appointment. ECM shall not be prevented in any way from selling within the Territory similar products or merchandise of other suppliers or manufacturers only if the manufacturer has first right of refusal in providing those products per ECM specifications. ECM shall notify Manufacturer in advance of appointing any new suppliers or manufacturers of products that are similar to that of the Manufacturers. |
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| b. | Definition of "Products." The term "Products" means the products listed on the Distributor Price List attached hereto as Exhibit A (the "Price List"). Products may be added to or deleted from the Price List by Manufacturer upon 60 days' prior written notice to ECM. |
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| c. | Definition of "Territory." The term "Territory" will mean the United States, Canada, Mexico and South Americas. |
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| 1. | Export Compliance. |
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| a. | ECM agrees to comply with all applicable U.S. export control laws and regulations, specifically including, by not limited to, the requirements of the Arms Export Control Act, 22 U.S.C. 2751-2794, including without limitation the International Traffic in Arms Regulation (ITAR), 22 C.F.R. 120 et seq,; and the Export Administration Act, 50 U.S.C. app. 2401-2420, including without limitation the Export Administration Regulations, 15 C.F.R. 730-774 (EAR); and the requirement for obtaining any export or reexport license or agreement, if applicable. Without limiting the foregoing, ECM agrees that it will not directly or indirectly transfer any export controlled item, data, or services, to include transfer to foreign persons employed by or associated with, or under contract to ECM, without authority of an export license, agreement or applicable exemption or exception, and shall use all reasonable efforts to ensure same. |
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| b. | ECM shall provide prompt notification to Manufacturer in the event of any violation or potential violation of any applicable laws or regulations, including without limitation the EAR or ITAR, and the initiation or existence of any government, quasi-government or other regulatory investigation or judicial body. |
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| c. | ECM represents that it is registered with the Office of Defense Trade Controls, as required by the ITAR, and it maintains an effective export/import compliance program in accordance with the ITAR. |
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| d. | ECM shall not make, offer, agree to make, directly or indirectly, any kind or political contribution to any political candidate, faction or committee, government officer or employee or any other person in the solicitation, promotion or sale of the Products, or on behalf or, or for the benefit of, the Manufacturer. |
| 2. | Term. The initial term of this Agreement will continue for twelve months after the Effective Date unless terminated as provided herein. The term will automatically renew upon each one-year anniversary date of the Effective Date until this Agreement is terminated as provided herein. |
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| 3. | Obligations of E M. ECM will: |
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| a. | Effectively promote the sale of the Products and generate and maintain sales of the Products within the Territory; |
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| b. | Provide timely delivery and superior customer service to ECM's customers with regard to the Products; |
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| c. | Provide Manufacturer with sales activity reports in a mutually agreeable format as follows: |
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| i. | A stock status report showing the month-end, on-hand quantities of the Products by device type and warehouse location,; and |
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| ii. | A point-of-sale report showing Product sales for the month by device type, customer name and address, quantity and distributor cost for the Products, |
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| iii. | Provide an annual sales report (Q3 - Q3) by October 31st of each year of the Term detailing sales of ITAR controlled items manufactured in Manufacturer's maquiladora. |
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| d. | Participate in such training programs as may be offered by Manufacturer; |
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| e. | Promptly investigate and monitor all customer concerns or inquiries regarding the Products and promptly inform Manufacturer of all such concerns and inquiries and any accidents, incidents or other events which may give rise to a claim involving the Products; |
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| f. | At all times comply with all federal, state and local laws, regulations and ordinances applicable to ECM's business, including but not limited to maintaining all licenses required by such laws; |
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| g. | Maintain comprehensive general liability and other insurance in accordance with industry standards and provide a Certificate of Insurance upon Manufacturer 's request; and |
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| h. | In the event of a recall of the Products by Manufacturer, ECM will cooperate with Manufacturer, which will have responsibility and final authority as to the actions taken with respect to ECM's customers and with respect to government authorities in implementing such recall. Such cooperation will include but not be limited to identifying customers and locating and retrieving, if necessary, recalled Products from ECM's customers. |
| 4. | Obligations of Manufacturer. Manufacturer will provide the following at no cost to ECM, in quantities and as otherwise deemed commercially reasonable by Manufacturer: |
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| a. | Current pricing and other information on the Products; |
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| b. | Marketing materials and samples for sales programs; |
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| c. | Training and technical support for the Products sold by ECM; and |
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| d. | A monthly status report listing all accepted orders that have not yet been shipped, indicating the part number, quantity, order date, purchase order number and Date of Shipment (as defined below) for each such order. |
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| 5. | Audits. At any time during the Term, upon reasonable prior written notice, Manufacturer may at its cost: |
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| a. | Conduct or authorize its agent to conduct an audit of those records of ECM which pertain to purchases and sales of the Products during the previous twelve months or from and after the last audit, whichever period is shorter; and |
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| b. | Conduct a physical inventory (or, in automated facilities, observe cycle counts and related methodology) of the Products at ECM's locations. |
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| The audit and inventory will be carried out at reasonable times and in a manner that will not disrupt or otherwise materially adversely impact the conduct of ECM's business. Manufacturer's auditors will sign non-disclosure agreements before being permitted to perform audit. If the results of the audit indicate that ECM has breached its obligations pursuant to this Agreement, the cost of the audit shall be paid ECM | |
| 6. | Orders; Rescheduling: Cancellation; Acceptance. |
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| a. | Orders. Manufacturer will accept each ECM purchase order, in writing, at the earliest practicable date, but in any event within five business days following receipt thereof, and will confirm the requested shipment date or specify an alternative shipment date (the "Date of Shipment"). ECM will have no obligation to order any minimum quantity of Products. All orders for the Products may be accepted or rejected in Manufacturer's sole discretion. ECM's purchase of the Products will be subject to Manufacturer's then-current standard terms and conditions, provided that the terms of this Agreement will control in the event of any conflict between this Agreement and such standard terms and conditions. |
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| b. | Rescheduling; Cancellation. ECM may reschedule the delivery of any orders for which a written request for rescheduling is received by Manufacturer at least 30 business days prior to the scheduled Date of Shipment. Orders inside of such 30-business-day lead time may not be rescheduled. ECM may cancel any orders for which a written request for cancellation is received by Manufacturer at least 40 business days prior to the scheduled Date of Shipment. Orders inside of such 40-business-day lead time may not be cancelled. Custom-made Products which are not included on the Price List or are otherwise designated as custom by Manufacturer shall not be cancellable by ECM. |
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| c. | Acceptance. ECM's acceptance of the Products will occur upon the earlier of five days after ECM's receipt of the Products or ECM providing written notice to Manufacturer that the Products are defective or do not conform to Manufacturer's applicable warranty, the terms of this Agreement, or ECM's order ("Non- conforming Parts"). Upon receipt of such written notice, Manufacturer will, in its discretion, accept return of such Products for credit to ECM or repair or replace such products at Manufacturer's cost. |
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| 7. | Shipping and Risk of Loss. |
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| a. | Packing and Labeling. Packing materials and shipping methods used by Manufacturer for the Products will conform to industry standards. Manufacturer will ensure that the SKU on the packing label matches the SKU on the price list and invoices. Manufacturer will mark each Product and shipping container in accordance with a mutually agreed upon label format. |
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| b. | Shipping Cost. ECM will pay the cost to ship the Products to the locations specified by ECM. |
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| c. | Title and Risk of Loss. Title and risk of loss of the Products will transfer to ECM upon acceptance of the Products by the carrier selected by ECM (tei.e., shipment of the Products from Manufacturer's locations). |
| 8. | Prices: Taxes: Payments. ECM will pay the prices for the Products as set forth in the Price List. |
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| a. | Price Changes. If Manufacturer offers ECM special pricing, discounts or any other terms pursuant to program offers, ECM may adjust the prices of the Products in its purchase orders to reflect such terms. Manufacturer may change the prices contained in the Price List upon 30 business daysgay' s prior written notice to ECM. |
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| b. | Taxes. The prices set forth in the Price List are exclusive of all taxes. Manufacturer will invoice ECM for all taxes applicable to sales of the Products which Manufacturer is required by law to collect from ECM. ECM shall be responsible for all custom and similar taxes and duties levied upon shipment and sale of the Products |
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| c. | Payments. Manufacturer will invoice ECM via electronic or fax transmission no later than the business day after shipment of the Products. Payment of the invoices will be due within 30 days of the invoice date. |
| 9. | Return of Products. |
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| a. | Annual Rotation. Once during each twelve-month period, ECM may return to Manufacturer for credit a quantity of Products delivered at least twelve months prior to the return date, the value of which (including all returns during such period except returns of Non-Conforming Parts) will not exceed 5% of the total amount invoiced by Manufacturer to ECM for all Products purchased by ECM during the previous twelve-month period. The amount of the credit will equal the price paid by ECM, less any prior credits taken thereon. Such returns will be shipped at ECM's cost to Manufacturer's designated location or locations. ECM must obtain a Return Material Authorization (RMA) from Manufacturer prior to shipment, and all Products returned must be in their original, smallest, unopened packaging, undamaged and in merchantable condition. |
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| b. | Recalled Product. ECM may return for credit any Products that are officially recalled by Manufacturer. |
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| c. | Non-Cancelable/Non-Retumable. Manufacturer shall inform ECM which Products are "Non-Cancelable/Non-Returnable" (NC/NR) and give ECM at least 90 days' prior written notice of any changes in Manufacturer's NC/NR classification of the Products. Notwithstanding the foregoing, Manufacturer and ECM may agree that a specific Product not otherwise NC/NR may be NC/NR for a particular ECM customer. |
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| 10. | Product Changes. |
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| a. | Addition and Deletion of Products. Manufacturer may add or delete Products from the Price List upon 30 days' prior written notice to ECM. |
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| b. | Obsolescence and Modification. Manufacturer reserves the right, upon at least 90 days' prior written notice to ECM, to (i) discontinue the manufacture or sale of, or otherwise render or treat as obsolete, any Product, (ii) modify the design or manufacture of any Product so as to preclude or limit ECM's sales of such Product, or (iii) modify the status of any Product so as to limit ECM's right to return or obtain price protection for such Product. ECM may, in its discretion, within 60 days of its receipt of such notice, notify Manufacturer in writing of its intention to return any or all such Products which remain in its inventory for a credit equal to the net price paid by ECM for such Products. Such returns will be shipped at ECM's cost to Manufacturer's designated location or locations. ECM must obtain a Return Material Authorization (RMA) from Manufacturer prior to shipment, and all Products returned must be in their original, smallest, unopened packaging, undamaged and in merchantable condition. |
| 11. | Limited Warranty. |
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| a. | Warranties to ECM. Subject to all subsections of this Section, Manufacturer warrants to ECM and its customers that: |
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| i. | The Products will be free from defects in design, workmanship and materials under normal use for one year after the sale of the Products by ECM to its customer; |
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| ii. | The Products will be free and clear of all liens at the time of sale to ECM; |
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| iii. | The Products will comply with all applicable laws; |
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| iv. | The Products will not infringe upon the intellectual property rights of any other person or entity; and |
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| v. | ECM is authorized to pass this limited warranty through to ECM's direct customers. |
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| b. | Remedies. Either ECM or ECM's customer may return any Product to Manufacturer under the terms of this limited warranty. Manufacturer's obligations under this limited warranty are limited to the repair or replacement, at its sole discretion, of the Products which are determined by Manufacturer to be not in compliance with this limited warranty, free of charge to the owner of the Products. |
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| c. | Exclusions. Manufacturer makes no representations, statements or warranties either express or implied, in connection with this Agreement or with respect to the Products or any related materials, including without limitation, those concerning merchantability or fitness for a particular purpose, or against infringement, other than as expressly specified herein. Any condition, term or warranty relating to this Agreement or the Products that might otherwise be implied or incorporated within this Agreement by reason of statute, common law or otherwise, is expressly excluded. |
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| Modification or change of any Product by ECM or any other party may void this limited warranty. Damage due to accidents, misuse, negligence, improper use, unintended use, storage or transport is not covered. Damage due to exposure to the elements or chemicals is not covered. |
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| d. | Limitations and Disclaimers. THIS LIMITED WARRANTY IS THE ONLY EXPRESS WARRANTY PROVIDED BY MANUFACTURER FOR THE PRODUCTS. MANUFACTURER ASSUMES NO OTHER OBLIGATION OR LIABILITY IN CONNECTION WITH THE PRODUCTS. MANUFACTURER DOES NOT AUTHORIZE ECM OR ANY OTHER PERSON OR ENTITY TO ALTER, AMEND OR OTHERWISE CHANGE THIS LIMITED WARRANTY IN ANY MANNER. MANUFACTURER IS NOT RESPONSIBLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR EXPENSES CLAIMED AS A RESULT OF THE USE OF THE PRODUCTS, INCLUDING BUT NOT LIMITED TO LOSS OF INCOME, DOWNTIME EXPENSES AND ANY OTHER COMMERCIAL LOSSES. THIS WARRANTY IS EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES AND REPRESENTATIONS, STATUTORY OR OTHERWISE, EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. |
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| e. | All warranty and indemnification provisions of this Agreement will survive the termination hereof. |
| 12. | Intellectual Property. |
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| a. | Indemnification. Manufacturer will indemnify, defend and hold harmless ECM, its shareholders, officers, directors, employees, agents, successors and assigns, and its customers (the "Indemnified Parties") against all losses, damages, costs and expenses (including reasonable attorneys' fees and costs) ("Losses") based on any claims, demands, suits, proceedings and actions ("Claims") in connection with any actual or alleged infringement of any patent, copyright, trademark, trade secret or other intellectual property right of a third party, including any Claims that the Products, or the process, design, or methodology used to manufacture the Products, infringes any third party patent, copyright, trademark, trade secret or other intellectual property right. |
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| b. | ECM Assistance. ECM will provide Manufacturer with written notice of any Claims, grants full authority to Manufacturer to defend and settle all Claims, and upon Manufacturer's request, provide reasonable assistance and information, at Manufacturer's reasonable cost and expense. |
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| c. | Ownership. ECM acknowledges that Manufacturer retains and will retain exclusive ownership of the Products, including without limitation all intellectual property rights with regard to the Products and any enhancements thereto. ECM further acknowledges that it shall not acquire any rights in respect of the Products and any other property rights associated therewith, including without limitation, the goodwill associated therewith, and that all such rights are, and shall remain vested, in Manufacturer. ECM shall not directly or indirectly reverse engineer or attempt to reverse engineer any aspect of the Products. All rights, title and interest in and to any invention, innovation, design, idea, application, process or improvement, related, directly or indirectly, to the Products, and any written documentation thereof, and all intellectual property which ECM may develop or create related to the Products or made or conceived using Manufacturer's proprietary information are "works made for hire" specifically ordered and commissioned for Manufacturer, and will be and remain forever the sole and exclusive property of Manufacturer. |
| 13. | General Indemnification and Damages. |
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| a. | Indemnification by Manufacturer. Manufacturer will indemnify, defend and hold harmless the Indemnified Parties against any and all Losses based on any Claims in connection with any actual or alleged death, personal injury or damage to property resulting from the Products or the use or operation thereof. Manufacturer will not be liable for any Losses resulting from any Claims arising as a result of ECM's negligence or modification of the Products. |
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| b. | Indemnification by ECM. ECM will indemnify, defend and hold harmless Manufacturer, its shareholders, officers, directors, employees, agents, successors and assigns, and its customers |
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| c. | Damages. The parties will not be liable to any person or entity in any circumstances related to this Agreement for any amounts representing indirect, special, incidental, consequential or punitive damages or damages based on any multiple of earnings or other factors. |
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| 14. | Termination. |
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| a. | Termination for Convenience. Either party may terminate this Agreement without cause and at any time upon giving 30 days' prior written notice to the other party (each, a termination for "Convenience"). Such termination will be effective on the date stated in the notice. |
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| b. | Termination for Cause. Either party may terminate this Agreement immediately (each, a termination for "Cause") in the event the other party: |
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| i. | Becomes bankrupt or otherwise insolvent; |
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| ii. | Assigns or transfers, either voluntarily or by operation oflaw, any or all of its rights or obligations under this Agreement without having obtained the prior written consent of the other party; or |
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| iii. | Fails to perform any of its material obligations under this Agreement and fails to cure such default within 30 days after written notice. |
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| c. | Effects of Termination: |
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| i. | Upon termination of this Agreement, Manufacturer will complete and ship all orders previously accepted, and will reject or cancel all orders not previously accepted. ECM will remain liable for, and timely pay for all orders accepted as of the date of termination of this Agreement. |
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| ii. | Upon termination of this Agreement, Manufacturer will, at ECM's option, repurchase any or all unsold Products in ECM's inventory or in transit to ECM on the effective date of termination. The repurchase price for such Products will be the actual net invoice price paid by ECM less any prior credits. |
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| iii. | If ECM terminates this Agreement for Cause or if Manufacturer terminates this Agreement for Convenience, then Manufacturer will pay all freight charges associated with the repurchase of Products under this Section without a re-stocking charge. |
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| iv. | If Manufacturer terminates this Agreement for Cause or if ECM terminates this Agreement for Convenience, then ECM will pay all freight charges associated with the repurchase of Products under this Section and a re-stocking charge of 15%. |
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| v. | All Products returned under this Section will be packaged in the original, smallest, unopened packaging, undamaged and in merchantable condition. |
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| Confidential Information. Each party will receive and maintain in confidence all technical, pricing, sales data, proprietary information and trade secrets of the other (including but not limited to knowledge of manufacturing or technical processes, financial and systems data and customer information) (collectively, the "Confidential Information"), except and to the extent that (a) disclosure is required by law, regulation or court order, or (b) such information enters into the public domain through no fault of the party obligated to maintain such confidentiality. Each party shall use the same degree of care as it uses to protect its own confidential information, but no less than reasonable care, to prevent the unauthorized use, dissemination or publication of the Confidential Information. Each party agrees to promptly advise the other of any unauthorized disclosure or use of the Confidential Information by any person. |
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| 15. | No Use of Trademarks/Trade Names. This Agreement does not create, and neither party will have any right in or to the use of, any mark, name or logo of the other party. ECM is, however, hereby granted a nonexclusive right to use Manufacturer's marks, names or logos to identify itself as an authorized distributor of the Products and for advertising and promoting its services under this Agreement solely on or in relation to the Product for the purpose of exercising its rights and performing its obligations under this Agreement. Manufacturer is hereby granted a nonexclusive right to use ECM's marks, names or logos to identify ECM as an authorized distributor of the Products. Such authorization shall cease immediately upon the expiration or termination, for any reason, of this Agreement All marketing catalogues, sales brochures, manuals and all other information and material relating to the Product shall not be used by ECM without first obtaining the prior approval of Manufacturer. All inventory specific to the Manufacturer at ECM will be returned to the Manufacturer and the Manufacturer will reimburse ECM for the full value of the inventory based on the original price paid. |
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| 16. | Cooperative Marketing. Manufacturer may in its sole discretion participate in the cost of ECM's promotional programs and other marketing efforts. |
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| 17. | General Provisions. |
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| a. | Independent Contractors. Manufacturer and ECM are independent contractors and neither will be considered the representative or agent of the other for any purpose. Nothing contained in this Agreement will be construed to establish a partnership, agency, joint venture, employment relationship or other relationship that would allow either party to make representations or warranties on behalf of the other except as expressly set forth herein. |
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| b. | Assignment. Neither party may assign this Agreement in whole or in part without the prior written consent of the other, which consent will not be unreasonably withheld. This Agreement will be binding upon and inure to the benefit of the parties and their permitted successors and assigns. |
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| C. | Entire Agreement; Amendment. This Agreement contains the entire understanding of the parties with respect to the subject matter herein and supersedes all prior agreements between the parties. Amendments to this Agreement must be in writing, signed by the duly authorized officers of the parties, specifically stating that such amendments are made pursuant to this Agreement. |
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| d. | No Implied Waivers. The failure of either party at any time to require performance by the other of any provision of this Agreement will not affect the right of such party to require performance at any time after, nor will the waiver of either party of a breach of any provision of this Agreement be taken or held to be a waiver of a provision itself. |
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| e. | Severability. In the event any provision of this Agreement is ruled invalid, illegal or unenforceable by a court of competent jurisdiction, the validity, legality and enforceability of the remaining provisions of this Agreement will remain in effect and will not in any way be affected or impaired by such ruling. |
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| f. | Force Maje ure. Neither party will be liable for failure to fulfill its obligations under this Agreement or any purchase order issued hereunder or for delays in delivery due to causes beyond its reasonable control, including, but not limited to, acts of God, acts of terrorism, epidemic, acts or omissions of the other party, man- made or natural disasters, strikes, delays in transportation or inability to obtain labor or materials through its regular sources. The time for performance of any such obligation will be extended for the time period lost by reason of the delay. |
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| g. | Conflicting Terms. The parties agree that the terms and conditions of this Agreement will prevail notwithstanding contrary or additional terms in any purchase order, sales acknowledgment, confirmation or any other document issued by either party affecting the purchase or sale of the Products. |
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| h. | Notices and Consents. Notices, consents and other communications by either party under this Agreement shall be deemed given when delivered in person or by facsimile, or on the third business day after being deposited in the United States mail as certified mail, postage prepaid, or on the first business day after being delivered to an overnight commercial courier, addressed as follows: |
If to Manufacturer:
AmpliTech Inc
620 Johnson Avenue
Bohemia, NY 11716
Attention: Fawad Maqbool
Facsimile: 631-521-7871
Ifto ECM:
East Coast Microwave Sales & Distribution, LLC.
70 Tower Office Park
Woburn, MA 01801
Attention: Alan K. Mond
Facsimile: 781-279-9034
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| i. | Governing Law; Jurisdiction and Venue. This Agreement will be interpreted in accordance with the laws of the State of Massachusetts without reference to its conflict of laws principles. The parties irrevocably agree that all actions or proceedings in any way, manner or respect arising out of or from or related to this Agreement will be litigated only in courts having sites within Middlesex County, Massachusetts. Each party hereby consents and submits to the exclusive jurisdiction of any local, state or federal court located within Middlesex County, Massachusetts and waives any right such party may have to transfer the venue of any such litigation. |
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| j. | Prevailing Party. The prevailing party in any legal action brought by one party against the other and arising out of this Agreement will be entitled, in addition to any other rights and remedies available to it at law or in equity, to reimbursement from the non-prevailing party for its costs and expenses, including reasonable attorney's fees and court costs, incurred with respect to bringing and maintaining any such action, provided that such costs and expenses are awarded to the prevailing party in the legal action. |
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| k. | Headings. The section or paragraph headings or titles herein are for convenience of reference only and will not be deemed a part of this Agreement. |
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| l. | Counterparts. This Agreement may be executed in counterparts and may be delivered by facsimile or electronic mail in .pdf format, each of which will be considered an original and which, when taken together, shall be considered a single agreement. |
[Signature page follows.]
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IN WITNESS WHEREOF, the parties have executed this Distribution Agreement as of the Effective Date.
| AMPLITECH INC. a New York Corporation |
| EAST COAST MICROWAVE SALES & DISTRIBUTION LLC A Massachusetts corporation |
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| By: | /s/ Fawad Maqbool |
| By: | /s/ Alan K. Mond |
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| Fawad Maqbool, Chief Executive Officer |
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| Alan K. Mond, President |
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| 13 |
EXHIBIT 10.9
SunBiz Holdings Corp.
31 Route22
Suite 200
Bridgewater, NJ 08854
February 14. 2018
Advisory Agreement
Parties:
SunBiz Holdings Corp. (Advisor), with a principal place of business at 991 Route 22, Suite 200, Bridgewater, NJ 08807, agrees to provide to Amplitech Group. Inc. located at 620 Johnson A.venue. Bohemia, NY 11716, and its related parties and principals ( Amplitech’’) strategic advisory services.
Services:
Advisor agrees to provide the following services to Arnplitech Group Inc.:
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| · | Specific assistance in managing and developing market awareness of its corporate image in Asia and the Middle East. |
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| · | Specific assistance in presentation of Ampltitech's products and1heir promotion, sales and distribution in Asia and the Middle East |
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| · | Specific assistance in reviewing and qualifying industry professionals that are interested in doing business wi1h Amplitech in the United States and abroad |
Terms:
The agreement will last for a period of 24 months from the date signed, herein
Compensation
Advisor will be paid compensation of a total of 2.2 million shares of Amplitech’s restricted common stock at current opening market price of $0.0325 per share on 2/14/2018. The stock will be issued on (2) different dates as follows:
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| 1} | First installment of 500,000 shares will be issued to-day |
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| 2) | Second and final installment of 1,700,000 shares will be issued next quarter on 4/1/12018 |
The first installment will be payable upon commencement and signing of the agreement in the name of “SunBiz Holdings Corp.”, and the second installment will be payable on 4/1/2016.
Warranties and Representations
Advisor hereby warrants and represents:
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| · | That It is not a law firm and does not provide legal advice, but will rather defer to Amplitech’s SEC attorney on all legal matters. |
The above terms are agreed upon:
SunBiz Holding Corp.
/s/ Suneel Sawant, CEO
Suneel Sawant, CEO
Amplitech Group, Inc.
/s/ Fawad Maqbool
Fawad Maqbool, CEO
EXHIBIT 10.10
BNB
Bank
BUSINESS LOAN AGREEMENT (ASSET BASED)
| Principal | Loan Date | Maturity | Loan No | Call/ Coll | Account | Officer | Initials |
| $750,000.00 | 11-20-2020 | 11-01-2021 | 2225071901 | 75 |
| *** |
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| References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. An item above containing “***” has been omitted due to text length limitations. | |||||||
| Borrower: | AMPLITECH, INC. | Lender: | BNB Bank |
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| 620 JOHNSON AVE STE 2 BOHEMIA, NY 11716 |
| 898 Veterans Memorial Highway, Suite 560 Hauppauge, NY 11788 |
THIS BUSINESS LOAN AGREEMENT (ASSET BASED) dated November 20, 2020, is made and executed between AMPLITECH, INC. (“Borrower”) and BNB Bank (“Lender”) on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement. Borrower understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender is relying upon Borrower’s representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender’s sole judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and conditions of this Agreement.
TERM. This Agreement shall be effective as of November 1, 2020, and shall continue in full force and effect until such time as all of Borrower’s Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys’ fees, and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement.
LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time from the date of this Agreement to the Expiration Date, provided the aggregate amount of such Advances outstanding at any time does not exceed the Borrowing Base. Within the foregoing limits, Borrower may borrow, partially or wholly prepay, and reborrow under this Agreement as follows:
Conditions Precedent to Each Advance. Lender’s obligation to make any Advance to or for the account of Borrower under this Agreement is subject to the following conditions precedent, with all documents, instruments, opinions, reports, and other items required under this Agreement to be in form and substance satisfactory to Lender:
(1) Lender shall have received evidence that this Agreement and all Related Documents have been duly authorized, executed, and delivered by Borrower to Lender.
(2) Lender shall have received such opinions of counsel, supplemental opinions, and documents as Lender may request.
(3) The security interests in the Collateral shall have been duly authorized, created, and perfected with first lien priority and shall be in full force and effect.
(4) All guaranties required by Lender for the credit facility(ies) shall have been executed by each Guarantor, delivered to Lender, and be in full force and effect.
(5) Lender, at its option and for its sole benefit, shall have conducted an audit of Borrower’s Accounts, Inventory, books, records, and operations, and Lender shall be satisfied as to their condition.
(6) Borrower shall have paid to Lender all fees, costs, and expenses specified in this Agreement and the Related Documents as are then due and payable.
(7) There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement, and Borrower shall have delivered to Lender the compliance certificate called for in the paragraph below titled “Compliance Certificate.”
Making Loan Advances. Advances under this credit facility, as well as directions for payment from Borrower’s accounts, may be requested orally or in writing by authorized persons. Lender may, but need not, require that all oral requests be confirmed in writing. Each Advance shall be conclusively deemed to have been made at the request of and for the benefit of Borrower (1) when credited to any deposit account of Borrower maintained with Lender or (2) when advanced in accordance with the instructions of an authorized person. Lender, at its option, may set a cutoff time, after which all requests for Advances will be treated as having been requested on the next succeeding Business Day.
Mandatory Loan Repayments. If at any time the aggregate principal amount of the outstanding Advances shall exceed the applicable Borrowing Base, Borrower, immediately upon written or oral notice from Lender, shall pay to Lender an amount equal to the difference between the outstanding principal balance of the Advances and the Borrowing Base. On the Expiration Date, Borrower shall pay to Lender in full the aggregate unpaid principal amount of all Advances then outstanding and all accrued unpaid interest, together with all other applicable fees, costs and charges, if any, not yet paid.
Loan Account. Lender shall maintain on its books a record of account in which Lender shall make entries for each Advance and such other debits and credits as shall be appropriate in connection with the credit facility. Lender shall provide Borrower with periodic statements of Borrower’s account, which statements shall be considered to be correct and conclusively binding on Borrower unless Borrower notifies Lender to the contrary within thirty (30) days after Borrower’s receipt of any such statement which Borrower deems to be incorrect.
COLLATERAL. To secure payment of the Primary Credit Facility and performance of all other Loans, obligations and duties owed by Borrower to Lender. Borrower (and others, if required) shall grant to Lender Security Interests in such property and assets as Lender may require. Lender’s Security Interests in the Collateral shall be continuing liens and shall include the proceeds and products of the Collateral, including without limitation the proceeds of any insurance. With respect to the Collateral, Borrower agrees and represents and warrants to Lender:
| Loan No: 2225071901 | BUSINESS LOAN AGREEMENT (ASSET BASED) (Continued) | Page 2 |
Perfection of Security Interests. Borrower agrees to execute all documents perfecting Lender’s Security Interest and to take whatever actions are requested by Lender to perfect and continue Lender’s Security Interests in the Collateral. Upon request of Lender, Borrower will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Borrower will note Lender’s interest upon any and all chattel paper and instruments if not delivered to Lender for possession by Lender. Contemporaneous with the execution of this Agreement, Borrower will execute one or more UCC financing statements and any similar statements as may be required by applicable law, and Lender will file such financing statements and all such similar statements in the appropriate location or locations. Borrower hereby appoints Lender as its irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect or to continue any Security Interest. Lender may at any lime, and without further authorization from Borrower, file a carbon, photograph, facsimile, or other reproduction of any financing statement for use as a financing statement. Borrower will reimburse Lender for all expenses for the perfection, termination, and the continuation of the perfection of Lender’s security interest in the Collateral. Borrower promptly will notify Lender before any change in Borrower’s name including any change to the assumed business names of Borrower. Borrower also promptly will notify Lender before any change in Borrower’s Social Security Number or Employer Identification Number. Borrower further agrees to notify Lender in writing prior to any change in address or location of Borrower’s principal governance office or should Borrower merge or consolidate with any other entity.
Collateral Records. Borrower does now, and at all times hereafter shall, keep correct and accurate records of the Collateral, all of which records shall be available to Lender or Lender’s representative upon demand for inspection and copying at any reasonable time. With respect to the Accounts, Borrower agrees to keep and maintain such records as Lender may require, including without limitation information concerning Eligible Accounts and Account balances and agings. Records related to Accounts (Receivables) are or will be located at . With respect to the Inventory, Borrower agrees to keep and maintain such records as Lender may require, including without limitation information concerning Eligible Inventory and records itemizing and describing the kind, type, quality, and quantity of Inventory, Borrower’s Inventory costs and selling prices, and the daily withdrawals and additions to Inventory. Records related to Inventory are or will be located at . The above is an accurate and complete list of all locations at which Borrower keeps or maintains business records concerning Borrower’s collateral.
Collateral Schedules. Concurrently with the execution and delivery of this Agreement, Borrower shall execute and deliver to Lender schedules of Accounts and Inventory and schedules of Eligible Accounts and Eligible Inventory in form and substance satisfactory to the Lender. Thereafter supplemental schedules shall be delivered according to the following schedule:
Representations and Warranties Concerning Accounts. With respect to the Accounts, Borrower represents and warrants to Lender: (1) Each Account represented by Borrower to be an Eligible Account for purposes of this Agreement conforms to the requirements of the definition of an Eligible Account; (2) All Account information listed on schedules delivered to Lender will be true and correct, subject to immaterial variance; and (3) Lender, its assigns, or agents shall have the right at any time and at Borrower’s expense to inspect, examine, and audit Borrower’s records and to confirm with Account Debtors the accuracy of such Accounts.
Representations and Warranties Concerning Inventory. With respect to the Inventory, Borrower represents and warrants to Lender: (1) All Inventory represented by Borrower to be Eligible Inventory for purposes of this Agreement conforms to the requirements of the definition of Eligible Inventory; (2) All Inventory values listed on schedules delivered to Lender will be true and correct, subject to immaterial variance; (3) The value of the Inventory will be determined on a consistent accounting basis; (4) Except as agreed to the contrary by Lender in writing, all Eligible Inventory is now and at all times hereafter will be in Borrower’s physical possession and shall not be held by others on consignment, sale on approval, or sale or return; (5) Except as reflected in the Inventory schedules delivered to Lender, all Eligible Inventory is now and at all times hereafter will be of good and merchantable quality, free from defects; (6) Eligible Inventory is not now and will not at any time hereafter be stored with a bailee, warehouseman, or similar party without Lender’s prior written consent, and, in such event, Borrower will concurrently at the time of bailment cause any such bailee, warehouseman, or similar party to issue and deliver to Lender, in form acceptable to Lender, warehouse receipts in Lender name evidencing the storage of Inventory; and (7) Lender, its assigns, or agents shall have the right at any time and at Borrower’s expense to inspect and examine the Inventory and to check and test the same as to quality, quantity, value, and condition.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:
Organization. Borrower is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of New York. Borrower is duly authorized to transact business in all other states in which Borrower is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. Borrower has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. Borrower maintains an office at 620 JOHNSON AVE STE 2, BOHEMIA, NY 11716. Unless Borrower has designated otherwise in writing, the principal office is the office at which Borrower keeps its books and records including its records concerning the Collateral. Borrower will notify Lender prior to any change in the location of Borrower’s state of organization or any change in Borrower’s name. Borrower shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to Borrower and Borrower’s business activities.
Assumed Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business: None.
Authorization. Borrower’s execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a) Borrower’s articles of incorporation or organization, or bylaws, or (b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower’s properties.
Financial Information. Each of Borrower’s financial statements supplied to Lender truly and completely disclosed Borrower’s financial condition as of the date of the statement, and there has been no material adverse change in Borrower’s financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously disclosed in Borrower’s financial statements or in writing to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower’s properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower’s properties are titled in Borrower’s legal name, and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years.
| Loan No: 2225071901 | BUSINESS LOAN AGREEMENT (ASSET BASED) (Continued) | Page 3 |
Hazardous Substances. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During the period of Borrower’s ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance by any person on, under. about or from any of the Collateral. (2) Borrower has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws; (b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine compliance of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower’s expense and for Lender’s purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower’s due diligence in investigating the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste or substance on the Collateral. The provisions of this section of the Agreement, including the obligation to indemnify and defend, shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement and shall not be affected by Lender’s acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower’s financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing.
Taxes. To the best of Borrower’s knowledge, all of Borrower’s tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower’s Loan and Note, that would be prior or that may in any way be superior to Lender’s Security Interests and rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:
Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower’s financial condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and audit Borrower’s books and records at all reasonable times.
Financial Statements. Furnish Lender with the following:
Additional Requirements. Business tax returns to be furnished by Borrower and received within 120 days from the fiscal year end, signed by business owner(s), unless extended with proof supplied.
Annual Schedule of Inventory signed by business owner(s), due within 20 days of designated period end.
Personal tax returns to be furnished by Individual Guarantor and received within 120 days from the calendar year end, signed by individual(s), unless extended with proof supplied.
Annual Schedule of Aged Accounts Payables, signed by business owner(s), due within 20 days of designated period end.
Annual Schedule of Aged Accounts Receivable signed by business owner(s), due within 20 days of designated period end.
Personal Financial Statement completed by Individual Guarantor on Lender form or non-Lender Form with Attestation.
Combined Business Financial Statements for Amplitech, Inc. and Specialty Microwave Corp. annually within 120 days of fiscal year end, signed by business owner(s).
All financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and statements, as Lender may request from time to time.
Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower’s properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least forty-five (45) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender’s loss payable or other endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.
Guaranties. Prior to disbursement of any Loan proceeds, furnish executed guaranties of the Loans in favor of Lender, executed by the guarantors named below, on Lender’s forms, and in the amounts and under the conditions set forth in those guaranties.
| Loan No: 2225071901 | BUSINESS LOAN AGREEMENT (ASSET BASED) (Continued) | Page 4 |
| Names of Guarantors | Amounts |
| FAWAD A. MAQBOOL | Unlimited |
| AMPLITECH GROUP, INC. | Unlimited |
Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.
Loan Fees, Charges and Expenses. In addition to all other agreed upon fees, charges, and expenses, pay the following: ADDITIONAL CHARGES. In addition to interest, I agree to pay the following charge which is not included in the principal amount above: 1. $500.00 annual fee on or about the anniversary date of each year of this Agreement Is in effect, which amount is subject to change provided 30 days notice from the Lender.
Loan Proceeds. Use all Loan proceeds solely for Borrower’s business operations, unless specifically consented to the contrary by Lender in writing.
Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits , prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower’s properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate proceedings, and (2) Borrower shall have established on Borrower’s books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with GAAP.
Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related Documents, and in all other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately In writing of any default in connection with any agreement.
Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel ; conduct its business affairs in a reasonable and prudent manner.
Environmental Studies. Promptly conduct and complete, at Borrower’s expense, all such investigations, studies, samplings and testings as may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or any facility owned, leased or used by Borrower.
Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the conduct of Borrower’s properties, businesses and operations, and to the use or occupancy of the Collateral, including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so long as, in Lender’s sole opinion, Lender’s interests in the Collateral are not jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender’s interest.
Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower’s other properties and to examine or audit Borrower’s books, accounts, and records and to make copies and memoranda of Borrower’s books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower’s expense.
Compliance Certificates. Unless waived in writing by Lender, provide Lender within fifteen (15) days after the end of each month and at the time of each disbursement of Loan proceeds, with a certificate executed by Borrower’s chief financial officer, or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to exist, as a result of an intentional or unintentional action or omission on Borrower’s part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities ; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower’s part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests.
LENDER’S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender’s interest in the Collateral or if Borrower fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower’s failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrower’s behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral . All such expenditures incurred or paid by Lender for such purposes, with the exception of insurance premiums paid by Lender with respect to motor vehicles, but including the payment of attorneys’ fees and expenses, will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender’s option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note’s maturity.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender:
Indebtedness and Liens. (1) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower’s assets (except as allowed as Permitted Liens), or (3) sell with recourse any of Borrower’s accounts, except to Lender.
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CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower’s financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor’s guaranty of the Loan or any other loan with Lender.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking, savings, or some other account and whether evidenced by a certificate of deposit). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.
DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:
Payment Default. Borrower fails to make any payment when due under the Loan.
Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.
Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s or any Grantor’s property or Borrower’s or any Grantor’s ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.
Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Loan. This includes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.
Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of the Loan is impaired.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender’s option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the “Insolvency” subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender’s rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Granter shall not affect Lender’s right to declare a default and to exercise its rights and remedies.
MAINTAIN DDA WITH LENDER. ***Borrower to maintain Demand Deposit Account with Lender for the life of the loan. Non-compliance will result in a one (1) percent rate increase on the facility.***
AUTO DEBIT. ***Loan repayment to be auto-debited from a Demand Deposit Account held with the Lender.***.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.
Attorneys’ Fees; Expenses. Borrower agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s reasonable attorneys’ fees and Lender’s legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s reasonable attorneys’ fees and legal expenses whether or not there is a lawsuit, including reasonable attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also shall pay all court costs and such additional fees as may be directed by the court.
| Loan No: 2225071901 | BUSINESS LOAN AGREEMENT (ASSET BASED) (Continued) | Page 6 |
Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender’s sale or transfer, whether now or later, of one or more participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower’s obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender.
Governing Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of New York without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State of New York.
Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of Suffolk County, State of New York.
No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Granter, shall constitute a waiver of any of Lender’s rights or of any of Borrower’s or any Grantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.
Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower’s current address. Unless otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers.
Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this Agreement.
Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word “Borrower” as used in this Agreement shall include all of Borrower’s subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrower’s subsidiaries or affiliates.
Successors and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shall bind Borrower’s successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have the right to assign Borrower’s rights under this Agreement or any interest therein, without the prior written consent of Lender.
Survival of Representations and Warranties. Borrower understands and agrees that in extending Loan Advances, Lender is relying on all representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the extension of Loan Advances and delivery to Lender of the Related Documents, shall be continuing in nature, shall be deemed made end redated by Borrower at the time each Loan Advance is made, and shall remain in full force and effect until such time as Borrower’s Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.
Time is of the Essence. Time is of the essence in the performance of this Agreement.
Waive Jury. All parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any party against any other party.
Oral Agreements Disclaimer. ***All loan agreements between Lender and Borrower (whether oral or written) will be supplanted with agreements on the documents signed at closing.***.
DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement:
Account. The word “Account” means a trade account, account receivable, other receivable, or other right to payment for goods sold or services rendered owing to Borrower (or to a third party grantor acceptable to Lender).
Account Debtor. The words “Account Debtor” mean the person or entity obligated upon an Account.
Advance. The word “Advance” means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower’s behalf under the terms and conditions of this Agreement.
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Agreement. The word “Agreement” means this Business Loan Agreement (Asset Based), as this Business Loan Agreement (Asset Based) may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement (Asset Based) from time to time.
Borrower. The word “Borrower’’ means AMPLITECH, INC. and includes all co-signers and co-makers signing the Note and all their successors and assigns.
Borrowing Base. The words “Borrowing Base” mean, as determined by Lender from time to time, the lesser of (1) $750,000.00 or (2) the sum of (a) 75.000% of the aggregate amount of Eligible Accounts, plus (b) 50.000% of the aggregate amount of Eligible Inventory.
Business Day. The words “Business Day” mean a day on which commercial banks are open in the State of New York.
Collateral. The word “Collateral” means all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. The word Collateral also includes without limitation all collateral described in the Collateral section of this Agreement.
Eligible Accounts. The words “Eligible Accounts” mean at any time, all of Borrower’s Accounts which contain selling terms and conditions acceptable to Lender. The net amount of any Eligible Account against which Borrower may borrow shall exclude all returns, discounts, credits, and offsets of any nature. Unless otherwise agreed to by Lender in writing, Eligible Accounts do not include:
(1) Accounts with respect to which the Account Debtor is employee or agent of Borrower.
(2) Accounts with respect to which the Account Debtor is a subsidiary of, or affiliated with Borrower or its shareholders, officers, or directors.
(3) Accounts with respect to which goods are placed on consignment, guaranteed sale, or other terms by reason of which the payment by the Account Debtor may be conditional.
(4) Accounts with respect to which Borrower is or may become liable to the Account Debtor for goods sold or services rendered by the Account Debtor to Borrower.
(5) Accounts which are subject to dispute, counterclaim, or setoff.
(6) Accounts with respect to which the goods have not been shipped or delivered, or the services have not been rendered, to the Account Debtor.
(7) Accounts with respect to which Lender, in its sole discretion, deems the creditworthiness or financial condition of the Account Debtor to be unsatisfactory.
(8) Accounts of any Account Debtor who has filed or has had filed against it a petition in bankruptcy or an application for relief under any provision of any state or federal bankruptcy, insolvency, or debtor-in-relief acts; or who has had appointed a trustee, custodian, or receiver for the assets of such Account Debtor; or who has made an assignment for the benefit of creditors or has become insolvent or fails generally to pay its debts (including its payrolls) as such debts become due.
(9) Accounts which have not been paid in full within Less than 90 days from the invoice date.
Eligible Inventory. The words “Eligible Inventory” mean, at any time, all of Borrower’s Inventory as defined below, except:
(1) Inventory which is not owned by Borrower free and clear of all security interests, liens, encumbrances, and claims of third parties.
(2) Inventory which Lender, in its sole discretion, deems to be obsolete, unsalable, damaged, defective, or unfit for further processing.
(3) Maximum amount of $250,000.00.
Environmental Laws. The words “Environmental Laws” mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto.
Event of Default. The words “Event of Default” mean any of the events of default set forth in this Agreement in the default section of this Agreement.
Expiration Date. The words “Expiration Date” mean the date of termination of Lender’s commitment to lend under this Agreement.
GAAP. The word “GAAP” means generally accepted accounting principles.
Grantor. The word “Grantor” means each and all of the persons or entities granting a Security Interest in any Collateral for the Loan, including without limitation all Borrowers granting such a Security Interest.
Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation party of any or all of the Loan.
Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.
Hazardous Substances. The words “Hazardous Substances” mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words “Hazardous Substances” are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term “Hazardous Substances” also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.
Indebtedness. The word “Indebtedness” means the indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents.
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Inventory. The word “Inventory” means all of Borrower’s raw materials, work in process, finished goods, merchandise, parts and supplies, of every kind and description, and goods held for sale or lease or furnished under contracts of service in which Borrower now has or hereafter acquires any right, whether held by Borrower or others, and all documents of title, warehouse receipts, bills of lading, and all other documents of every type covering all or any part of the foregoing. Inventory includes inventory temporarily out of Borrower’s custody or possession and all returns on Accounts.
Lender. The word “Lender’’ means BNB Bank, its successors and assigns.
Loan. The word “Loan” means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time.
Note. The word “Note” means the Note dated November 20, 2020 and executed by AMPLITECH, INC. in the principal amount of $750,000.00, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement.
Permitted Liens. The words “Permitted Liens” mean (1) liens and security interests securing Indebtedness owed by Borrower to Lender; (2) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled “Indebtedness and Liens”; (5) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower’s assets.
Primary Credit Facility. The words “Primary Credit Facility” mean the credit facility described in the Line of Credit section of this Agreement.
Related Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Loan.
Security Agreement. The words “Security Agreement” mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest.
Security Interest. The words “Security Interest” mean, without limitation, any and all types of collateral security, present and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT (ASSET BASED) AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT (ASSET BASED) IS DATED NOVEMBER 20, 2020.
BORROWER:
AMPLITECH, INC.
By: /s/ Fawad A. Maqbool
Fawad A. Maqbool, President of AMPLITECH, INC.
LENDER:
BNB BANK
By: /s/ Marie A McAlary
Marie McAlary, Vice President
*000000002225071901000000000*
CORPORATE RESOLUTION TO GRANT COLLATERAL/ GUARANTEE
| Principal | Loan Date | Maturity | Loan No | Call/ Coll | Account | Officer | Initials |
| $750,000.00 | 11-20-2020 | 11-01-2021 | 2225071901 | 75 |
| *** |
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| References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. An item above containing “***” has been omitted due to text length limitations. | |||||||
| Borrower: | AMPLITECH, INC. 620 JOHNSON AVE STE 2 BOHEMIA, NY 11716 | Lender: | BNB Bank 898 Veterans Memorial Highway, Suite 560 Hauppauge, NY 11788 |
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| Corporation: | AMPLITECH GROUP, INC. 620 JOHNSON AVE STE 2 BOHEMIA, NY 11716 |
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I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:
THE CORPORATION’S EXISTENCE. The complete and correct name of the Corporation is AMPLITECH GROUP, INC. (“Corporation”). The Corporation is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Nevada. The Corporation is duly authorized to transact business in all other states in which the Corporation is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which the Corporation is doing business. Specifically, the Corporation is, and at all limes shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. The Corporation has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. The Corporation maintains an office at 620 JOHNSON AVE STE 2, BOHEMIA, NY 11716. Unless the Corporation has designated otherwise in writing, the principal office is the office at which the Corporation keeps its books and records. The Corporation will notify Lender prior to any change in the location of the Corporation’s state of organization or any change in the Corporation’s name. The Corporation shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to the Corporation and the Corporation’s business activities.
RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the Corporation is a close corporation having no Board of Directors then at a meeting of the Corporation’s shareholders, duly called and held on November 20, 2020, at which a quorum was present and voting, or by other duly authorized action in lieu of a meeting, the resolutions set forth in this Resolution were adopted.
OFFICER. The following named person is an officer of AMPLITECH GROUP, INC.:
| Names |
| Titles |
| Authorized |
| Actual Signatures |
| FAWAD A. MAQBOOL |
| President |
| Y |
| /s/ Fawad A. Maqbool |
ACTIONS AUTHORIZED. The authorized person listed above may enter into any agreements of any nature with Lender, and those agreements will bind the Corporation. Specifically, but without limitation, the authorized person is authorized, empowered, and directed to do the following for and on behalf of the Corporation:
Guaranty. To guarantee or act as surety for loans or other financial accommodations to Borrower from Lender on such guarantee or surety terms as may be agreed upon between the officer of the Corporation and Lender and in such sum or sums of money as in his or her judgment should be guaranteed or assured, (the “Guaranty”).
Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or otherwise encumber and deliver to Lender any property now or hereafter belonging to the Corporation or in which the Corporation now or hereafter may have an interest, including without limitation all of the Corporation’s real property and all of the Corporation’s personal property (tangible or intangible), as security for the Guaranty, and as a security for the payment of any loans, any promissory notes, or any other or further indebtedness of AMPLITECH, INC. to Lender at any time owing, however the same may be evidenced. Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the time such loans are obtained or such indebtedness is incurred, or at any other time or times, and may be either in addition to or in lieu of any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated or encumbered. The provisions of this Resolution authorizing or relating to the pledge, mortgage, transfer, endorsement, hypothecation, granting of a security interest in, or in any way encumbering, the assets of the Corporation shall include, without limitation, doing so in order to lend collateral security for the indebtedness, now or hereafter existing, and of any nature whatsoever, of AMPLITECH, INC. to Lender. The Corporation has considered the value to itself of lending collateral in support of such Indebtedness, and the Corporation represents to Lender that the Corporation is benefited by doing so.
Execute Security Documents. To execute and deliver to Lender the forms of mortgage, deed of trust, pledge agreement, hypothecation agreement, and other security agreements and financing statements which Lender may require and which shall evidence the terms and conditions under and pursuant to which such liens and encumbrances, or any of them, are given; and also to execute and deliver to Lender any other written instruments, any chattel paper, or any other collateral, of any kind or nature, which Lender may deem necessary or proper in connection with or pertaining to the giving of the liens and encumbrances.
Further Acts. To do and perform such other acts and things and to execute and deliver such other documents and agreements, Including agreements waiving the right to a trial by jury, as the officer may in his or her discretion deem reasonably necessary or proper in order to carry into effect the provisions of this Resolution.
ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or filings required by law relating to all assumed business names used by the Corporation. Excluding the name of the Corporation, the following is a complete list of all assumed business names under which the Corporation does business: None.
NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at Lender’s address shown above (or such other addresses as Lender may designate from time to time) prior to any (A) change in the Corporation’s name; (B) change in the Corporation’s assumed business name(s); (C) change in the management of the Corporation; (D) change in the authorized signer(s;) (E) change in the Corporation’s principal office address; (F) change in the Corporation’s state of organization; (G) conversion of the Corporation to a new or different type of business entity; or (H) change in any other aspect of the Corporation that directly or indirectly relates to any agreements between the Corporation and Lender. No change in the Corporation’s name or state of organization will take effect until after Lender has received notice.
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| Loan No: 2225071901 | CORPORATE RESOLUTION TO GRANT COLLATERAL/ GUARANTEE (Continued) | Page 2 |
CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officer named above is duly elected, appointed, or employed by or for the Corporation, as the case may be, and occupies the position set opposite his or her respective name. This Resolution now stands of record on the books of the Corporation, is in full force and effect, and has not been modified or revoked in any manner whatsoever.
NO CORPORATE SEAL. The Corporation has no corporate seal, and therefore, no seal is affixed to this Resolution.
CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and performed prior to the passage of this Resolution are hereby ratified and approved. This Resolution shall be continuing, shall remain in full force and effect and Lender may rely on it until written notice of its revocation shall have been delivered to and received by Lender at Lender’s address shown above (or such addresses as Lender may designate from time to time). Any such notice shall not affect any of the Corporation’s agreements or commitments in effect at the lime notice is given.
IN TESTIMONY WHEREOF, I have hereunto set my hand and attest that the signature set opposite the name listed above is his or her genuine signature.
I have read all the provisions of this Resolution, and I personally and on behalf of the Corporation certify that all statements and representations made in this Resolution are true and correct. This Corporate Resolution to Grant Collateral / Guarantee is dated November 20, 2020.
| CERTIFIED TO AND ATTESTED BY: | |||
| X /s/ Fawad A. Maqbool | |||
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| FAWAD A. MAQBOOL, President of AMPLITECH GROUP, INC. |
NOTE: If the officer signing this Resolution is designated by the foregoing document as one of the officers authorized to act on the Corporation’s behalf, it is advisable to have this Resolution signed by at least one non-authorized officer of the Corporation.
*000000002225071901000000000*
CORPORATE RESOLUTION TO BORROW/ GRANT COLLATERAL
| Principal | Loan Date | Maturity | Loan No | Call/ Coll | Account | Officer | Initials |
| $750,000.00 | 11-20-2020 | 11-01-2021 | 2225071901 | 75 |
| *** |
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| References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. An item above containing “***” has been omitted due to text length limitations. | |||||||
| Corporation: | AMPLITECH, INC. 620 JOHNSON AVE STE 2 BOHEMIA, NY 11716 | Lender: | BNB Bank 898 Veterans Memorial Highway, Suite 560 Hauppauge, NY 11788 |
I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:
THE CORPORATION’S EXISTENCE. The complete and correct name of the Corporation is AMPLITECH, INC. (“Corporation”). The Corporation is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of New York. The Corporation is duly authorized to transact business in all other states in which the Corporation is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which the Corporation is doing business. Specifically, the Corporation is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. The Corporation has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. The Corporation maintains an office at 620 JOHNSON AVE STE 2, BOHEMIA, NY 11716. Unless the Corporation has designated otherwise in writing, the principal office is the office at which the Corporation keeps its books and records. The Corporation will notify Lender prior to any change in the location of the Corporation’s state of organization or any change in the Corporation’s name. The Corporation shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to the Corporation and the Corporation’s business activities.
RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the Corporation is a close corporation having no Board of Directors then at a meeting of the Corporation’s shareholders, duly called and held on November 20, 2020, at which a quorum was present and voting, or by other duly authorized action in lieu of a meeting, the resolutions set forth in this Resolution were adopted.
OFFICER. The following named person is an officer of AMPLITECH, INC.:
| Names |
| Titles |
| Authorized |
| Actual Signatures |
| FAWAD A. MAQBOOL |
| President |
| Y |
| /s/ Fawad A. Maqbool |
ACTIONS AUTHORIZED. The authorized person listed above may enter into any agreements of any nature with Lender, and those agreements will bind the Corporation. Specifically, but without limitation, the authorized person is authorized, empowered, and directed to do the following for and on behalf of the Corporation:
Borrow Money. To borrow, as a cosigner or otherwise, from time to time from Lender, on such terms as may be agreed upon between the Corporation and Lender, such sum or sums of money as in his or her judgment should be borrowed, without limitation.
Execute Notes. To execute and deliver to Lender the promissory note or notes, or other evidence of the Corporation’s credit accommodations, on Lender’s forms, at such rates of interest and on such terms as may be agreed upon, evidencing the sums of money so borrowed or any of the Corporation’s indebtedness to Lender, and also to execute and deliver to Lender one or more renewals, extensions, modifications, refinancings, consolidations, or substitutions for one or more of the notes, any portion of the notes, or any other evidence of credit accommodations.
Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or otherwise encumber and deliver to Lender any property now or hereafter belonging to the Corporation or in which the Corporation now or hereafter may have an interest, including without limitation all of the Corporation’s real property and all of the Corporation’s personal property (tangible or intangible), as security for the payment of any loans or credit accommodations so obtained, any promissory notes so executed (including any amendments to or modifications, renewals, and extensions of such promissory notes), or any other or further indebtedness of the Corporation to Lender at any time owing, however the same may be evidenced. Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the time such loans are obtained or such indebtedness is incurred, or at any other time or times, and may be either in addition to or in lieu of any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated or encumbered.
Execute Security Documents. To execute and deliver to Lender the forms of mortgage, deed of trust, pledge agreement, hypothecation agreement, and other security agreements and financing statements which Lender may require and which shall evidence the terms and conditions under and pursuant to which such liens and encumbrances, or any of them, are given; and also to execute and deliver to Lender any other written instruments, any chattel paper, or any other collateral, of any kind or nature, which Lender may deem necessary or proper in connection with or pertaining to the giving of the liens and encumbrances.
Negotiate Items. To draw, endorse, and discount with Lender all drafts, trade acceptances, promissory notes, or other evidences of indebtedness payable to or belonging to the Corporation or in which the Corporation may have an interest, and either to receive cash for the same or to cause such proceeds to be credited to the Corporation’s account with Lender, or to cause such other disposition of the proceeds derived therefrom as he or she may deem advisable.
Further Acts. In the case of lines of credit, to designate additional or alternate individuals as being authorized to request advances under such lines, and in all cases, to do and perform such other acts and things, to pay any and all fees and costs, and to execute and deliver such other documents and agreements, including agreements waiving the right to a trial by jury, as the officer may in his or her discretion deem reasonably necessary or proper in order to carry into effect the provisions of this Resolution.
ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or filings required by law relating to all assumed business names used by the Corporation. Excluding the name of the Corporation, the following is a complete list of all assumed business names under which the Corporation does business: None.
*000000002225071901000000000*
| Loan No: 2225071901 | CORPORATE RESOLUTION TO BORROW/ GRANT COLLATERAL (Continued) | Page 2 |
NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at Lender’s address shown above (or such other addresses as Lender may designate from time to time) prior to any (A) change in the Corporation’s name; (B) change in the Corporation’s assumed business name(s); (C) change in the management of the Corporation; (D) change in the authorized signer(s); (E) change in the Corporation’s principal office address; (F) change in the Corporation’s state of organization; (G) conversion of the Corporation to a new or different type of business entity; or (H) change in any other aspect of the Corporation that directly or indirectly relates to any agreements between the Corporation and Lender. No change in the Corporation’s name or state of organization will take effect until after Lender has received notice.
CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officer named above is duly elected, appointed, or employed by or for the Corporation, as the case may be, and occupies the position set opposite his or her respective name. This Resolution now stands of record on the books of the Corporation, is in full force and effect, and has not been modified or revoked in any manner whatsoever.
NO CORPORATE SEAL. The Corporation has no corporate seal, and therefore, no seal is affixed to this Resolution.
CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and performed prior to the passage of this Resolution are hereby ratified and approved. This Resolution shall be continuing, shall remain in full force and effect and Lender may rely on it until written notice of its revocation shall have been delivered to and received by Lender at Lender’s address shown above (or such addresses as Lender may designate from time to time). Any such notice shall not affect any of the Corporation’s agreements or commitments in effect at the time notice is given.
IN TESTIMONY WHEREOF, I have hereunto set my hand and attest that the signature set opposite the name listed above is his or her genuine signature.
I have read all the provisions of this Resolution, and I personally and on behalf of the Corporation certify that all statements and representations made in this Resolution are true and correct. This Corporate Resolution to Borrow / Grant Collateral is dated November 20, 2020.
| CERTIFIED TO AND ATTESTED BY: | |||
| X /s/ Fawad A. Maqbool | |||
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| FAWAD A. MAQBOOL, President of AMPLITECH, INC. |
NOTE: If the officer signing this Resolution is designated by the foregoing document as one of the officers authorized to act on the Corporation’s behalf, it is advisable to have this Resolution signed by at least one non-authorized officer of the Corporation.
BNB
Bank
COMMERCIAL GUARANTY
| Borrower: | AMPLITECH, INC. 620 JOHNSON AVE STE 2 BOHEMIA, NY 11716 | Lender: | BNB Bank 898 Veterans Memorial Highway, Suite 560 Hauppauge, NY 11788 |
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| Guarantor: | FAWAD A. MAQBOOL 126 SKYLINE DR CORAM, NY 11727 |
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CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely and unconditionally guarantees full and punctual payment and satisfaction of the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrower’s obligations under the Note and the Related Documents. This is a guaranty of payment and performance and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has not exhausted Lender’s remedies against anyone else obligated to pay the Indebtedness or against any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness. Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United States of America, in same-day funds, without set-off or deduction or counterclaim, and will otherwise perform Borrower’s obligations under the Note and Related Documents. Under this Guaranty, Guarantor’s liability is unlimited and Guarantor’s obligations are continuing.
INDEBTEDNESS. The word “Indebtedness” as used in this Guaranty means all of the principal amount outstanding from lime to lime and at any one or more times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted by law, reasonable attorneys’ fees, arising from any and all debts, liabilities and obligations of every nature or form, now existing or hereafter arising or acquired, that Borrower individually or collectively or interchangeably with others, owes or will owe Lender. “Indebtedness” includes, without limitation, loans, advances, debts, overdraft indebtedness, credit card indebtedness, lease obligations, liabilities and obligations under any interest rate protection agreements or foreign currency exchange agreements or commodity price protection agreements, other obligations, and liabilities of Borrower, and any present or future judgments against Borrower, future advances, loans or transactions that renew, extend, modify, refinance, consolidate or substitute these debts, liabilities and obligations whether: voluntarily or involuntarily incurred; due or to become due by their terms or acceleration; absolute or contingent; liquidated or unliquidated; determined or undetermined; direct or indirect; primary or secondary in nature or arising from a guaranty or surety; secured or unsecured; joint or several or joint and several; evidenced by a negotiable or non-negotiable instrument or writing; originated by Lender or another or others; barred or unenforceable against Borrower for any reason whatsoever; for any transactions that may be voidable for any reason (such as infancy, insanity, ultra vires or otherwise); and originated then reduced or extinguished and then afterwards increased or reinstated.
If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, Lender’s rights under all guaranties shall be cumulative. This Guaranty shall not (unless specifically provided below to the contrary) affect or invalidate any such other guaranties. Guarantor’s liability will be Guarantor’s aggregate liability under the terms of this Guaranty and any such other unterminated guaranties.
CONTINUING GUARANTY. THIS IS A “CONTINUING GUARANTY” UNDER WHICH GUARANTOR AGREES TO GUARANTEE THE FULL AND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OF THE INDEBTEDNESS OF BORROWER TO LENDER, NOW EXISTING OR HEREAFTER ARISING OR ACQUIRED, ON AN OPEN AND CONTINUING BASIS. ACCORDINGLY, ANY PAYMENTS MADE ON THE INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTOR’S OBLIGATIONS AND LIABILITY UNDER THIS GUARANTY FOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS EVEN WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAY BE A ZERO BALANCE FROM TIME TO TIME.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all the Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied and all of Guarantor’s other obligations under this Guaranty shall have been performed in full. If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing. Guarantor’s written notice of revocation must be mailed to Lender, by certified mail, at Lender’s address listed above or such other place as Lender may designate in writing. Written revocation of this Guaranty will apply only to new Indebtedness created after actual receipt by Lender of Guarantor’s written revocation. For this purpose and without limitation, the term “new Indebtedness” does not include the Indebtedness which at the lime of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute, liquidated, determined or due. For this purpose and without limitation, “new Indebtedness” does not include all or part of the Indebtedness that is: incurred by Borrower prior to revocation; incurred under a commitment that became binding before revocation; any renewals, extensions, substitutions, and modifications of the Indebtedness. This Guaranty shall bind Guarantor’s estate as to the Indebtedness created both before and after Guarantor’s death or incapacity, regardless of Lender’s actual notice of Guarantor’s death. Subject to the foregoing, Guarantor’s executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect. Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation Lender receives from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. It is anticipated that fluctuations may occur in the aggregate amount of the Indebtedness covered by this Guaranty, and Guarantor specifically acknowledges and agrees that reductions in the amount of the Indebtedness, even to zero dollars ($0.00), shall not constitute a termination of this Guaranty. This Guaranty is binding upon Guarantor and Guarantor’s heirs, successors and assigns so long as any of the Indebtedness remains unpaid and even though the Indebtedness may from time to time be zero dollars ($0.00).
GUARANTOR’S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand and without lessening Guarantor’s liability under this Guaranty, from time to time: (A) prior to revocation as set forth above, to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower; (B) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than the original loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such security, with or without the substitution of new collateral; (D) to release, substitute, agree not to sue, or deal with any one or more of Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (G) to sell, transfer, assign or grant participations in all or any part of the Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.
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| COMMERCIAL GUARANTY (Continued) | Page 2 |
GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrower’s request and not at the request of Lender; (C) Guarantor has full power, right and authority to enter into this Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (E) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein; (F) upon Lender’s request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present Guarantor’s financial condition as of the dates the financial information is provided; (G) no material adverse change has occurred in Guarantor’s financial condition since the date of the most recent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantor’s financial condition; (H) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower’s financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower.
GUARANTOR’S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require Lender (A) to continue lending money or to extend other credit to Borrower; (B) to make any presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the Indebtedness or in connection with the creation of new or additional loans or obligations; (C) to resort for payment or to proceed directly or at once against any person, including Borrower or any other guarantor; (D) to proceed directly against or exhaust any collateral held by Lender from Borrower, any other guarantor, or any other person; (E) to pursue any other remedy within Lender’s power; or (F) to commit any act or omission of any kind, or at any time, with respect to any matter whatsoever.
Guarantor also waives any and all rights or defenses based on suretyship or impairment of collateral including, but not limited to, any rights or defenses arising by reason of (A) any “one action” or “anti-deficiency” law or any other law which may prevent Lender from bringing any action, including a claim for deficiency, against Guarantor, before or after Lender’s commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; (B) any election of remedies by Lender which destroys or otherwise adversely affects Guarantor’s subrogation rights or Guarantor’s rights to proceed against Borrower for reimbursement, including without limitation, any loss of rights Guarantor may suffer by reason of any law limiting, qualifying, or discharging the Indebtedness; (C) any disability or other defense of Borrower, of any other guarantor, or of any other person, or by reason of the cessation of Borrower’s liability from any cause whatsoever, other than payment in full in legal tender, of the Indebtedness; (D) any right to claim discharge of the Indebtedness on the basis of unjustified impairment of any collateral for the Indebtedness; (E) any statute of limitations, if at any time any action or suit brought by Lender against Guarantor is commenced, there is outstanding Indebtedness which is not barred by any applicable statute of limitations; or (F) any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness. If payment is made by Borrower, whether voluntarily or otherwise, or by any third party, on the Indebtedness and thereafter Lender is forced to remit the amount of that payment to Borrower’s trustee in bankruptcy or to any similar person under any federal or state bankruptcy law or law for the relief of debtors, the Indebtedness shall be considered unpaid for the purpose of the enforcement of this Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor, or both.
GUARANTOR’S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantor’s full knowledge of its significance and consequences and that. under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Guarantor’s accounts with Lender (whether checking, savings, or some other account and whether evidenced by a certificate of deposit). This includes all accounts Guarantor holds jointly with someone else and all accounts Guarantor may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Guarantor authorizes Lender, to the extent permitted by applicable law, to hold these funds if there is a default, and Lender may apply the funds in these accounts to pay what Guarantor owes under the terms of this Guaranty.
SUBORDINATION OF BORROWER’S DEBTS TO GUARANTOR. Guarantor agrees that the Indebtedness, whether now existing or hereafter created, shall be superior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to time to file financing statements and continuation statements and to execute documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Guaranty:
Amendments. This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.
Attorneys’ Fees; Expenses. Guarantor agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s reasonable attorneys’ fees and Lender’s legal expenses, incurred in connection with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s reasonable attorneys’ fees and legal expenses whether or not there is a lawsuit, including reasonable attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by the court.
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| COMMERCIAL GUARANTY (Continued) | Page 3 |
Caption Headings. Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty.
Governing Law. This Guaranty will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of New York without regard to its conflicts of law provisions.
Choice of Venue. If there is a lawsuit, Guarantor agrees upon Lender’s request to submit to the jurisdiction of the courts of Suffolk County, State of New York.
Integration. Guarantor further agrees that Guarantor has read and fully understands the terms of this Guaranty; Guarantor has had the opportunity to be advised by Guarantor’s attorney with respect to this Guaranty; the Guaranty fully reflects Guarantor’s intentions and parol evidence is not required to interpret the terms of this Guaranty. Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, and costs (including Lender’s attorneys’ fees) suffered or incurred by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of this paragraph.
Interpretation. In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words “Borrower’’ and “Guarantor” respectively shall mean all and any one or more of them. The words “Guarantor,” “Borrower,” and “Lender’’ include the heirs, successors, assigns, and transferees of each of them. If a court finds that any provision of this Guaranty is not valid or should not be enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or enforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may be found to be invalid or unenforceable. If any one or more of Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, managers, or other agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty.
Notices. Any notice required to be given under this Guaranty shall be given in writing, and, except for revocation notices by Guarantor, shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Guaranty. All revocation notices by Guarantor shall be in writing and shall be effective upon delivery to Lender as provided in the section of this Guaranty entitled “DURATION OF GUARANTY.” Any party may change its address for notices under this Guaranty by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. For notice purposes, Guarantor agrees to keep Lender informed at all times of Guarantor’s current address. Unless otherwise provided or required by law, if there is more than one Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all Guarantors.
No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lender’s rights or of any of Guarantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.
Successors and Assigns. Subject to any limitations stated in this Guaranty on transfer of Guarantor’s interest, this Guaranty shall be binding upon and inure to the benefit of the parties, their successors and assigns.
Waive Jury. Lender and Guarantor hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Guarantor against the other.
DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Guaranty. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Guaranty shall have the meanings attributed to such terms in the Uniform Commercial Code:
Borrower. The word “Borrower’’ means AMPLITECH, INC. and includes all co-signers and co-makers signing the Note and all their successors and assigns.
Guarantor. The word “Guarantor” means everyone signing this Guaranty, including without limitation FAWAD A. MAQBOOL, and in each case, any signer’s successors and assigns.
Guaranty. The word “Guaranty” means this guaranty from Guarantor to Lender.
Indebtedness. The word “Indebtedness” means Borrower’s indebtedness to Lender as more particularly described in this Guaranty.
Lender. The word “Lender’’ means BNB Bank, its successors and assigns.
Note. The word “Note” means and includes without limitation all of Borrower’s promissory notes and/or credit agreements evidencing Borrower’s loan obligations in favor of Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of and substitutions for promissory notes or credit agreements.
Related Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness.
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| COMMERCIAL GUARANTY (Continued) | Page 4 |
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”. NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED NOVEMBER 20, 2020.
GUARANTOR
/s/ Fawad A. Maqbool
FAWAD A. MAQBOOL
BNB
Bank
COMMERCIAL GUARANTY
| Borrower: | AMPLITECH, INC. 620 JOHNSON AVE STE 2 BOHEMIA, NY 11716 | Lender: | BNB Bank 898 Veterans Memorial Highway, Suite 560 Hauppauge, NY 11788 |
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| Guarantor: | AMPLITECH GROUP, INC. 620 JOHNSON AVE STE 2 BOHEMIA, NY 11716 |
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CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely and unconditionally guarantees full and punctual payment and satisfaction of the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrower’s obligations under the Note and the Related Documents. This is a guaranty of payment and performance and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has not exhausted Lender’s remedies against anyone else obligated to pay the Indebtedness or against any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness. Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United States of America, in same-day funds, without set-off or deduction or counterclaim, and will otherwise perform Borrower’s obligations under the Note and Related Documents. Under this Guaranty, Guarantor’s liability is unlimited and Guarantor’s obligations are continuing.
INDEBTEDNESS. The word “Indebtedness” as used in this Guaranty means all of the principal amount outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted by law, reasonable attorneys’ fees, arising from any and all debts, liabilities and obligations of every nature or form, now existing or hereafter arising or acquired, that Borrower individually or collectively or interchangeably with others, owes or will owe Lender. “Indebtedness” includes, without limitation, loans, advances, debts, overdraft indebtedness, credit card indebtedness, lease obligations, liabilities and obligations under any interest rate protection agreements or foreign currency exchange agreements or commodity price protection agreements, other obligations, and liabilities of Borrower, and any present or future judgments against Borrower, future advances, loans or transactions that renew, extend, modify, refinance, consolidate or substitute these debts, liabilities and obligations whether: voluntarily or involuntarily incurred; due or to become due by their terms or acceleration; absolute or contingent; liquidated or unliquidated; determined or undetermined; direct or indirect; primary or secondary in nature or arising from a guaranty or surety; secured or unsecured; joint or several or joint and several; evidenced by a negotiable or non-negotiable instrument or writing; originated by Lender or another or others; barred or unenforceable against Borrower for any reason whatsoever; for any transactions that may be voidable for any reason (such as infancy, insanity, ultra vires or otherwise); and originated then reduced or extinguished and then afterwards increased or reinstated.
If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, Lender’s rights under all guaranties shall be cumulative. This Guaranty shall not (unless specifically provided below to the contrary) affect or invalidate any such other guaranties. Guarantor’s liability will be Guarantor’s aggregate liability under the terms of this Guaranty and any such other unterminated guaranties.
CONTINUING GUARANTY. THIS IS A “CONTINUING GUARANTY” UNDER WHICH GUARANTOR AGREES TO GUARANTEE THE FULL AND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OF THE INDEBTEDNESS OF BORROWER TO LENDER, NOW EXISTING OR HEREAFTER ARISING OR ACQUIRED, ON AN OPEN AND CONTINUING BASIS. ACCORDINGLY, ANY PAYMENTS MADE ON THE INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTOR’S OBLIGATIONS AND LIABILITY UNDER THIS GUARANTY FOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS EVEN WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAY BE A ZERO BALANCE FROM TIME TO TIME.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all the Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied and all of Guarantor’s other obligations under this Guaranty shall have been performed in full. If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing. Guarantor’s written notice of revocation must be mailed to Lender, by certified mail, at Lender’s address listed above or such other place as Lender may designate in writing. Written revocation of this Guaranty will apply only to new Indebtedness created after actual receipt by Lender of Guarantor’s written revocation. For this purpose and without limitation, the term “new Indebtedness” does not include the Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute, liquidated, determined or due. For this purpose and without limitation, “new Indebtedness” does not include all or part of the Indebtedness that is: incurred by Borrower prior to revocation; incurred under a commitment that became binding before revocation; any renewals, extensions, substitutions, and modifications of the Indebtedness. This Guaranty shall bind Guarantor’s estate as to the Indebtedness created both before and after Guarantor’s death or incapacity, regardless of Lender’s actual notice of Guarantor’s death. Subject to the foregoing, Guarantor’s executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect. Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation Lender receives from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. It is anticipated that fluctuations may occur in the aggregate amount of the Indebtedness covered by this Guaranty, and Guarantor specifically acknowledges and agrees that reductions In the amount of the Indebtedness, even to zero dollars ($0.00), shall not constitute a termination of this Guaranty. This Guaranty Is binding upon Guarantor and Guarantor’s heirs, successors and assigns so long as any of the Indebtedness remains unpaid and even though the Indebtedness may from time to time be zero dollars ($0.00).
GUARANTOR’S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand and without lessening Guarantor’s liability under this Guaranty, from time to time: (A) prior to revocation as set forth above, to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower; (B) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than the original loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such security, with or without the substitution of new collateral; (D) to release, substitute, agree not to sue, or deal with any one or more of Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (G) to sell, transfer, assign or grant participations in all or any part of the Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.
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| COMMERCIAL GUARANTY (Continued) | Page 2 |
GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (8) this Guaranty is executed at Borrower’s request and not at the request of Lender; (C} Guarantor has full power, right and authority to enter into this Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (E) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein; (F) upon Lender’s request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present Guarantor’s financial condition as of the dates the financial information is provided; (G) no material adverse change has occurred in Guarantor’s financial condition since the date of the most recent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantor’s financial condition; (H} no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (J} Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower’s financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower.
GUARANTOR’S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require Lender (A) to continue lending money or to extend other credit to Borrower; (B} to make any presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the Indebtedness or in connection with the creation of new or additional loans or obligations; (C) to resort for payment or to proceed directly or at once against any person, including Borrower or any other guarantor; (D) to proceed directly against or exhaust any collateral held by Lender from Borrower, any other guarantor, or any other person; (E} to pursue any other remedy within Lender’s power; or (F) to commit any act or omission of any kind, or at any time, with respect to any matter whatsoever.
Guarantor also waives any and all rights or defenses based on suretyship or impairment of collateral including, but not limited to, any rights or defenses arising by reason of (A) any “one action” or “anti-deficiency” law or any other law which may prevent Lender from bringing any action, including a claim for deficiency, against Guarantor, before or after Lender’s commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; (B) any election of remedies by Lender which destroys or otherwise adversely affects Guarantor’s subrogation rights or Guarantor’s rights to proceed against Borrower for reimbursement, including without limitation, any loss of rights Guarantor may suffer by reason of any law limiting, qualifying, or discharging the Indebtedness; (C) any disability or other defense of Borrower, of any other guarantor, or of any other person, or by reason of the cessation of Borrower’s liability from any cause whatsoever, other than payment in full in legal tender, of the Indebtedness; (D) any right to claim discharge of the Indebtedness on the basis of unjustified impairment of any collateral for the Indebtedness; (E) any statute of limitations, if at any time any action or suit brought by Lender against Guarantor is commenced, there is outstanding Indebtedness which is not barred by any applicable statute of limitations; or (F) any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness. If payment is made by Borrower, whether voluntarily or otherwise, or by any third party, on the Indebtedness and thereafter Lender is forced to remit the amount of that payment to Borrower’s trustee in bankruptcy or to any similar person under any federal or state bankruptcy law or law for the relief of debtors, the Indebtedness shall be considered unpaid for the purpose of the enforcement of this Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor, or both.
GUARANTOR’S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantor’s full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Guarantor’s accounts with Lender (whether checking, savings, or some other account and whether evidenced by a certificate of deposit}. This includes all accounts Guarantor holds jointly with someone else and all accounts Guarantor may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Guarantor authorizes Lender, to the extent permitted by applicable law, to hold these funds if there is a default, and Lender may apply the funds in these accounts to pay what Guarantor owes under the terms of this Guaranty.
SUBORDINATION OF BORROWER’S DEBTS TO GUARANTOR. Guarantor agrees that the Indebtedness, whether now existing or hereafter created, shall be superior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to time to file financing statements and continuation statements and to execute documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Guaranty:
Amendments. This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.
Attorneys’ Fees; Expenses. Guarantor agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s reasonable attorneys’ fees and Lender’s legal expenses. incurred in connection with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s reasonable attorneys’ fees and legal expenses whether or not there is a lawsuit, including reasonable attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction}, appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by the court.
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| COMMERCIAL GUARANTY (Continued) | Page 3 |
Caption Headings. Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty.
Governing Law. This Guaranty will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of New York without regard to its conflicts of law provisions.
Choice of Venue. If there is a lawsuit, Guarantor agrees upon Lender’s request to submit to the jurisdiction of the courts of Suffolk County, State of New York.
Integration. Guarantor further agrees that Guarantor has read and fully understands the terms of this Guaranty; Guarantor has had the opportunity to be advised by Guarantor’s attorney with respect to this Guaranty; the Guaranty fully reflects Guarantor’s intentions and parol evidence is not required to interpret the terms of this Guaranty. Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, and costs (including Lender’s attorneys’ fees) suffered or incurred by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of this paragraph.
Interpretation. In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words “Borrower’’ and “Guarantor” respectively shall mean all and any one or more of them. The words “Guarantor,” “Borrower,” and “Lender” include the heirs, successors, assigns, and transferees of each of them. If a court finds that any provision of this Guaranty is not valid or should not be enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or enforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may be found to be invalid or unenforceable. If any one or more of Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, managers, or other agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty.
Notices. Any notice required to be given under this Guaranty shall be given in writing, and, except for revocation notices by Guarantor, shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Guaranty. All revocation notices by Guarantor shall be in writing and shall be effective upon delivery to Lender as provided in the section of this Guaranty entitled “DURATION OF GUARANTY.” Any party may change its address for notices under this Guaranty by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. For notice purposes, Guarantor agrees to keep Lender informed at all times of Guarantor’s current address. Unless otherwise provided or required by law, if there is more than one Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all Guarantors.
No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lender’s rights or of any of Guarantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.
Successors and Assigns. Subject to any limitations stated in this Guaranty on transfer of Guarantor’s interest, this Guaranty shall be binding upon and inure to the benefit of the parties, their successors and assigns.
Waive Jury. Lender and Guarantor hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Guarantor against the other.
DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Guaranty. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Guaranty shall have the meanings attributed to such terms in the Uniform Commercial Code:
Borrower. The word “Borrower’’ means AMPLITECH, INC. and includes all co-signers and co-makers signing the Note and all their successors and assigns.
Guarantor. The word “Guarantor’’ means everyone signing this Guaranty, including without limitation AMPLITECH GROUP, INC., and in each case, any signer’s successors and assigns.
Guaranty. The word “Guaranty” means this guaranty from Guarantor to Lender.
Indebtedness. The word “Indebtedness” means Borrower’s indebtedness to Lender as more particularly described in this Guaranty.
Lender. The word “Lender’’ means BNB Bank, its successors and assigns.
Note. The word “Note” means and includes without limitation all of Borrower’s promissory notes and/or credit agreements evidencing Borrower’s loan obligations in favor of Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of and substitutions for promissory notes or credit agreements.
Related Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness.
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| COMMERCIAL GUARANTY (Continued) | Page 4 |
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”. NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED NOVEMBER 20, 2020.
GUARANTOR:
AMPLITECH GROUP, INC.
/s/ Fawad A. Maqbool
FAWAD A. MAQBOOL, President of AMPLITECH GROUP, INC.
BNB
Bank
ERRORS AND OMISSIONS AGREEMENT
| Principal | Loan Date | Maturity | Loan No | Call/ Coll | Account | Officer | Initials |
| $750,000.00 | 11-20-2020 | 11-01-2021 | 2225071901 | 75 |
| *** |
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| References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. An item above containing “***” has been omitted due to text length limitations. | |||||||
| Borrower: | AMPLITECH, INC. 620 JOHNSON AVE STE 2 BOHEMIA, NY 11716 | Lender: | BNB Bank 898 Veterans Memorial Highway, Suite 560 Hauppauge, NY 11788 |
LOAN NO.: 2225071901
The undersigned Borrower for and in consideration of the above-referenced Lender funding the closing of this loan agrees, if requested by Lender or Closing Agent for Lender, to fully cooperate and adjust for clerical errors, any or all loan closing documentation if deemed necessary or desirable in the reasonable discretion of Lender to enable Lender to sell, convey, seek guaranty or market said loan to any entity, including but not limited to an investor, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Government National Mortgage Association, Federal Housing Authority or the Department of Veterans Affairs.
The undersigned Borrower does hereby so agree and covenant in order to assure that this loan documentation executed this date will conform and be acceptable in the marketplace in the instance of transfer, sale or conveyance by Lender of its interest in and to said loan documentation.
DATED effective this November 20, 2020
BORROWER:
AMPLITECH, INC.
GUARANTOR
By: /s/ Fawad A. Maqbool
FAWAD A. MAQBOOL, President of AMPLITECH, INC.
BNB
Bank
DISBURSEMENT REQUEST AND AUTHORIZATION
| Principal | Loan Date | Maturity | Loan No | Call/ Coll | Account | Officer | Initials |
| $750 000.00 | 11-20-2020 | 11-01-2021 | 2225071901 | 75 |
| *** |
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| References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. An item above containing “***” has been omitted due to text length limitations. | |||||||
| Borrower: | AMPLITECH, INC. 620 JOHNSON AVE STE 2 BOHEMIA, NY 11716 | Lender: | BNB Bank 898 Veterans Memorial Highway, Suite 560 Hauppauge, NY 11788 |
LOAN TYPE. This is a Variable Rate Nondisclosable Revolving Line of Credit Loan to a Corporation for $750,000.00 due on November 1, 2021 . This is an unsecured renewal of the following described indebtedness: This Promissory Note is effective as of October 1, 2020 and is given in renewal and increase and not in novation of the following described indebtedness: “Promissory Note dated September 12, 2019 in the principal amount of $500,000.00 by Amplitech, Inc. to BNB Bank; together with all prior renewals, amendments or modifications thereto or restatements thereof.”.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
☐ Personal, Family, or Household Purposes or Personal Investment.
☒ Business (Including Real Estate Investment).
SPECIFIC PURPOSE. The specific purpose of this loan is: Renewal With Increase.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be disbursed until all of Lender’s conditions for making the loan have been satisfied. Please disburse the loan proceeds of $750,000.00 as follows:
| Other Disbursements: |
| $ | 750,000.00 |
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| $200,000.00 Currently Funded |
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| $550,000.00 Available for Advance |
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| Note Principal: |
| $ | 750,000.00 |
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FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE 15 TRUE AND CORRECT AND THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER’S FINANCIAL CONDITION AS DISCLOSED IN BORROWER’S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS AUTHORIZATION 15 DATED NOVEMBER 20, 2020.
BORROWER:
AMPLITECH, INC.
By: /s/ Fawad A. Maqbool
FAWAD A. MAQBOOL, President of AMPLITECH, INC.
| BNB Bank | 898 Veterans Memorial Highway Suite 560 Hauppauge, NY 11788 631.537.1000
www.bnbbank.com |
Authorization for Pre -Authorized Payments
I hereby authorize BNB Bank (“Bank”) to initiate debit entries (and to initiate, if necessary, credit entries and adjustments for any debit entries in error) to my account indicated below. I also authorize the Depository named below, to credit and/or debit the entries to such account.
FROM:
Depository Name BNB Bank
Account Number ***********
Routing Number (If External Account)
TO:
Loan Account Number **********
Amount Any or such other amount as may be required to be paid pursuant to the Note dated November 20, 2020
| Frequency | Monthly |
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| Effective Date | 01/01/2021 | Termination Date |
This authority shall remain in full force until the Bank has received notification from me of its termination in such time as to allow the Bank and the Depository reasonable opportunity to act on it.
If a transfer date is a non-processing day for the Bank then the transfer will be made on the first processing day after the scheduled transfer date.
| NAME Amplitech, Inc. | ID NUMBER |
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| SIGNATURE /s/ Fawad A. Maqbool | Date 11/19/20 | 2:40 PM PST |
PLEASE ATTACH A VOIDED CHECK OR DEPOSIT TICKET FOR VERIFICATION.
FOR BANK USE ONLY
Date Received: _________
Processed By: __________
Revised 03/2019
BNB Bank
Closing Information Worksheet
Friday, November 20, 2020
| Borrower: | Ampliech, Inc. |
| Loan Number: | 2225071901 |
| Total Loan Amount: | $750,000.00 |
| Loan Type: | Commercial Line of Credit |
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| Fee Waived |
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| Borrower Owes: |
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| Documentation Prep Fees: |
| $ | 500.00 |
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| $ | 500.00 |
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| Short Term Interest due on Renewal |
| $ | 3,177.77 |
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| $ | 3,177.77 |
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| Total: |
| $ | 3,677.77 |
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| $ | 3,677.77 |
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| Amount Due: |
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| $ | 3,677.77 |
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| Please Debit DDA |
| ******* |
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Authorized By: /s/ Fawad A. Maqbool
Fawad A. Maqbool, President
| BNB Bank | 898 Veterans Memorial Highway Suite 560 Hauppauge, NY 11788 631.537.1000
www.bnbbank.com |
Note Addendum
By accepting and using the Loan proceeds the Borrower agrees to and acknowledges receipt of the following terms and conditions:
USA Patriot Act Notice: To help the U.S. government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each Applicant (“you”, “your”) that opens a loan account. This means that when an Applicant (defined below) opens a loan account, BNB BANK (“Bank”, “we”, “us”) will ask for the business name, business address, taxpayer identifying number and other information that will allow us to identify the Applicant, such as organizational documents. For some business entities we may need to ask for identifying information and documentation relating to certain individuals associated with the business or organization, including such individual’s name, address, date of birth and other information that will help us identify such person. For example, we may also ask to see such person’s driver’s license or other official documents to identify such person.
ECOA Notice: The federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract), because all or part of the applicant’s income derives from any public assistance program, or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning this creditor is: Federal Reserve Consumer Help Center, P.O. Box 1200 Minneapolis, MN 55480.
New York Human Rights Law Notice: The New York Human Rights Law also prohibits creditors from discriminating in the granting, withholding, extending or renewing, or in the fixing of the rates, terms or conditions of, any form of credit, on the basis of race, creed, color, national origin, sexual orientation, military status, age, sex, marital status, disability, or familial status.
Ownership of Applicant. If one or more Applicants is a corporation, limited liability company or any other type of business entity (each, an “Entity”), Applicant agrees to provide Bank with a certification of beneficial owners in form and substance acceptable to Bank for each such Entity that is executed by the principals of each Entity in connection with this loan application and any time an updated version may be requested by Bank from time to time (“Certification of Beneficial Owners”). The Applicant represents 2and warrants, as of the date of this loan application and as of the date on which each updated Certification of Beneficial Owners is provided to Bank, that the information in the Certification of Beneficial Owners is true, complete and correct. You agree to provide updated versions of the Certification of Beneficial Owners promptly following each change in the beneficial ownership or the controlling party of Applicant. Further, from time to time Bank may be required to verify the continued accuracy of the information provided in the Certification of Beneficial Owners. The Applicant agrees to provide written confirmation of the accuracy of the information in a then current Certification of Beneficial Owners or deliver a new Certification of Beneficial Owners in form and substance acceptable to Bank when requested by Bank.
The Applicant further agrees to provide such other information and documentation as may reasonably be requested by Bank from time to time for purposes of compliance by the Bank with applicable laws and regulations (including, without limitation, the USA Patriot Act and anti-money laundering rules and regulations) and any policy or procedure implemented by Bank to comply therewith. Bank is authorized to make all inquiries it deems necessary to verify accuracy of the information submitted in your loan application and to determine the Applicant’s creditworthiness, and to share any information provided to Bank by or about any Applicant(s) with any third party that performs services for Bank in connection with this application or the loan or to whom this application or any loan to the Applicant may be transferred.
Deposit Account: Sensitive Enterprises. Applicant understands and agrees that, if the loan application is approved, it will be required to establish and maintain a deposit account at the Bank during the term of the loan. The Bank’s policy requires that Applicants whose business includes participating in certain sensitive enterprises, such as check cashing, money transfer, gambling and marijuana/cannabis production and sales must be evaluated carefully before a deposit or loan account is established.
Notice for Denial: If you have applied for credit and your request is denied you have the right to a written statement of the specific reasons for denial. To obtain the statement, you must write to us within 60 days from the date you are notified of our decision at: 898 Veterans Memorial Highway, Suite 560 Hauppauge, NY 11788] or call us at: (631) 537-1000. We will send you a written statement of the reason(s) for denial within 30 days of receiving your request for the statement.
Indemnity. You agree that the Bank shall be entitled to rely on the accuracy and completeness of all representations and all the information provided by you and you, on behalf of the Applicant, hereby indemnify the Bank, its affiliates and their respective directors, officers, employees and agents (each an “Indemnified Party”) from, and hold each Indemnified Party harmless from and against, all actions, causes of action, claims, damages, liabilities and expenses (including reasonable attorneys’ fees) of any nature or kind (including those by third parties) arising out of, or related to, any violations or inaccuracies of the undertakings made pursuant to these Terms and Conditions.
Bank Property. You agree that the loan application, including all materials submitted by Applicant in connection with it, is the property of the Bank, whether or not the application is approved or a loan is originated.
Agreement for Electronic Delivery and Signature (“Esign Agreement”). Borrower hereby agrees to receive information from and provide information to Bank electronically pursuant to the terms and conditions of this E-Sign Agreement. This E-Sign Agreement contains important information and disclosures about your rights and obligations in connection with your application for a loan from Bank If you choose not to agree to the terms and conditions of this E-Sign Agreement, you should not utilize the proceeds of your loan and advise us accordingly. Please read and retain a copy of this E-Sign Agreement for your records.
By providing telephone number(s) to the Bank, our affiliates or agents, whether in the application or separately at a later time, you authorize the Bank, and/or our affiliates and agents to contact you regarding your loan account(s) with us at the telephone numbers provided using any means, including but not limited to placing calls using an automated dialing system to cell phone or VoIP numbers or leaving pre- recorded messages or sending text messages. You agree that you may incur charges for any such calls or text messages. You further agree that any phone call with us may be monitored or recorded by us for quality control and other purposes. Also, by providing an e-mail address, Borrower consents and agrees to receive electronic mail from the Bank, our affiliates and agents.
Electronic Agreement - By accepting and using the Loan proceeds the Borrower:
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| 1) | Certifies that Borrower has permission to apply jointly and/or on behalf of all persons who qualify as a Borrower in the loan application and that all such persons are aware of and have authorized the submission of the loan application. If you are agreeing to the terms and conditions of this E-Sign Agreement on behalf of an Entity, you certify that you have been duly appointed and authorized to take action on behalf of such Entity, whether by a resolution or other similar and adequate means by its owners, shareholders, board of directors, members, or any other persons required to authorize you to act on its behalf to: (i) submit and receive information; and (ii) execute an application and all other agreements applicable to your loan; and (iii) bind the Entity to the obligations as set forth in or presented to you by electronic means through this web site or by other electronic means. |
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| 2) | Agrees on behalf of the Borrower, either personally or for an Entity on whose behalf you are acting, to this E-Sign Agreement. |
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| 3) | Agrees to submit information to, receive information from, and enter into agreements with the Bank electronically in accordance with the requirements of the federal Electronic Signatures In Global and National Commerce Act and any applicable requirements of any governmental agency or authority related to your loan obligation. |
READ AND AGREED TO:
Amplitech, Inc.
By: /s/ Fawad A. Maqbool
Name: Fawad A. Maqbool
Title: President
EXHIBIT 10.11
*000000002225071901000000000*
| BNB |
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PROMISSORY NOTE
| Principal | Loan Date | Maturity | Loan No | Call/ Coll | Account | Officer | Initials |
| $750 000.00 | 11-20-2020 | 11-01-2021 | 2225071901 | 75 |
| *** |
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| References in the boxes above are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing "***" has been omitted due to text length limitations. | |||||||
| Borrower: | AMPLITECH, INC. |
| Lender: | BNB Bank |
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| 620 JOHNSON AVE STE 2 |
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| 898 Veterans Memorial Highway, Suite 560 |
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| BOHEMIA, NY 11716 |
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| Hauppauge, NY 11788 |
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| Principal Amount: $750,000.00 | Date of Note: November 20, 2020 |
PROMISE TO PAY. To repay Borrower's loan, AMPLITECH, INC. ("Borrower") promises to pay to BNB Bank ("Lender''), or order, in lawful money of the United States of America, the principal amount of Seven Hundred Fifty Thousand & 00/100 Dollars ($750,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on November 1, 2021. In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning January 1, 2021, with all subsequent interest payments to be due on the same day of each month after that. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid Interest; then to any late charges; then to any unpaid collection costs; then to any escrow or reserve account payments as required under any mortgage, deed of trust, or other security instrument or security agreement securing this Note; and then to principal. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to lime based on changes in an independent index which is the WSJ Prime Rate Index (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans. Lender will tell Borrower the current Index rate upon Borrower's request. The interest rate change will not occur more often than each Day. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 3.250% per annum. Interest on the unpaid principal balance of this Note will be calculated as described in the "INTEREST CALCULATION METHOD" paragraph using a rate of 1.000 percentage point over the Index (the "Margin"), rounded up to the nearest 0.125 percent, adjusted if necessary for any minimum and maximum rate limitations described below, resulting in an initial rate of 5.500% per annum based on a year of 360 days. If Lender determines, in its sole discretion, that the Index has become unavailable or unreliable, either temporarily, indefinitely, or permanently, during the term of this Note, Lender may amend this Note by designating a substantially similar substitute index. Lender may also amend and adjust the Margin to accompany the substitute index. The change to the Margin may be a positive or negative value, or zero. In making these amendments, Lender may take into consideration any then-prevailing market convention for selecting a substitute index and margin for the specific Index that is unavailable or unreliable. Such an amendment to the terms of this Note will become effective and bind Borrower 10 business days after Lender gives written notice to Borrower without any action or consent of the Borrower. NOTICE: Under no circumstances will the interest rate on this Note be less than 5.500% per annum or more than the maximum rate allowed by applicable law.
INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. All interest payable under this Note is computed using this method.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid interest. Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment Instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: BNB Bank, 898 Veterans Memorial Highway, Suite 560 Hauppauge, NY 11788.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the regularly scheduled payment.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest rate on this Note shall be increased by adding an additional 5.000 percentage point margin ("Default Rate Margin"). The Default Rate Margin shall also apply to each succeeding interest rate change that would have applied had there been no default. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.
DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note:
Payment Default. Borrower fails to make any payment when due under this Note.
Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.
Default In Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the related documents.
False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Note or the related documents is false or misleading in any material respect, either now or at the lime made or furnished or becomes false or misleading at any time thereafter.
*000000002225071901000000000*
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| PROMISSORY NOTE |
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| Loan No: 2225071901 | (Continued) | Page 2 |
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Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount detem1ined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note.
Change In Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or perfom1ance of this Note is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount.
ATTORNEYS' FEES; EXPENSES. Borrower agrees to pay all costs and expenses Lender incurs to collect this Note. This includes, subject to any limits under applicable law, Lender's reasonable attorneys' fees and Lender's legal expenses whether or not there is a lawsuit, including reasonable attorneys' fees and expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law.
JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other.
GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of New York without regard to Its conflicts of law provisions. This Note has been accepted by Lender in the State of New York.
CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of Suffolk County, State of New York.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $35.00 if Borrower makes a payment on Borrower's loan and the check or preauthorized charge with which Borrower pays is later dishonored.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account and whether evidenced by a certificate of deposit). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts, and, at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff rights provided in this paragraph.
COLLATERAL. Borrower acknowledges this Note is secured by A Commercial Security Agreement dated September 12, 2019 made and executed between Amplitech, Inc. and BNB Bank on collateral described as: inventory, chattel paper, accounts, equipment, general intangibles, fixtures, standing timber and mineral oil and gas. If there is any inconsistency between the tem1s and conditions of this Note and the tem1s and conditions of the collateral documents, the terms and conditions of this Note shall prevail.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note may be requested either orally or in writing by Borrower or by an authorized person. Lender may, but need not, require that all oral requests be confim1ed in writing. All communications, instructions , or directions by telephone or otherwise to Lender are to be directed to Lender's office shown above. Borrower agrees to be liable for all sums either: (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower's accounts with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Note if: (A) Borrower or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note; (B) Borrower or any guarantor ceases doing business or is insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor's guarantee of this Note or any other loan with Lender; or (D) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized by Lender.
PRIOR NOTE. This Promissory Note is effective as of October 1, 2020 and is given in renewal and increase and not in novation of the following described indebtedness: "Promissory Note dated September 12, 2019 in the principal amount of $500,000.00 by Amplitech, Inc. to BNB Bank; together with all prior renewals, amendments or modifications thereto or restatements thereof.".
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower , and upon Borrower's heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.
NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Borrower may notify Lender if Lender reports any inaccurate information about Borrower's account(s) to a consumer reporting agency. Borrower's written notice describing the specific inaccuracy(ies) should be sent to Lender at the following address: BNB Bank 898 Veterans Memorial Highway, Suite 560 Hauppauge, NY 11788.
*000000002225071901000000000*
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| PROMISSORY NOTE |
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| Loan No: 2225071901 | (Continued) | Page 3 |
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GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:
AMPLITECH, INC.
By: /s/ Fawad A. Maqbool
FAWAD A. MAQBOOL, President of AMPLTIECH, INC.
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this registration statement on Form S-1 of our report dated March 25, 2020, with respect to our audits of the consolidated financial statements of AmpliTech Group, Inc. as of and for the years ended December 31, 2019 and 2018. We also consent to the reference to our firm under the heading “Experts” in this registration statement.
/s/ Sadler, Gibb & Associates, LLC
Salt Lake City, UT
December 10, 2020
