AMPG 10-Q
AmpliTech Group, Inc. (AMPG)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
For
the quarterly period ended
or
For the transition period from __________ to__________
Commission
File Number
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
The Stock Market LLC | ||||
The
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Indicate
by check mark whether registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 8, 2024, the registrant had shares of common stock, par value $ per share, issued and outstanding.
AMPLITECH GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
September 30, 2024
TABLE OF CONTENTS
| PAGE | |||
| PART I - FINANCIAL INFORMATION | |||
| Item 1. | Financial Statements (Unaudited) | 4 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 32 | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 37 | |
| Item 4. | Controls and Procedures | 37 | |
| PART II - OTHER INFORMATION | 38 | ||
| Item 1. | Legal Proceedings | 38 | |
| Item 1A. | Risk Factors | 38 | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 38 | |
| Item 3. | Defaults Upon Senior Securities | 38 | |
| Item 4. | Mine Safety Disclosures | 38 | |
| Item 5. | Other Information | 38 | |
| Item 6. | Exhibits | 38 | |
| SIGNATURES | 39 | ||
Use of Certain Defined Terms
Except as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our Company”, “the Company”, “AmpliTech”, “Specialty” or “SMW” “Spectrum” or “SSM”, “AmpliTech Group MMIC Design Center” or “AGMDC”, “AmpliTech Group True G Speed Services” or “AGTGSS” are the combined business of AmpliTech Group, Inc., and its consolidated subsidiary, AmpliTech, Inc., and AMPG’s divisions Specialty Microwave, Spectrum Semiconductor Materials, AmpliTech Group MMIC Design Center and AmpliTech Group True G Speed Services.
| 2 |
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.
We cannot predict all the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved, and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Quarterly Report on Form 10-Q and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.
These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Considering these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements concerning other matters addressed in this Quarterly Report on Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Quarterly Report on Form 10-Q.
Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
| 3 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
AmpliTech Group, Inc.
Condensed Consolidated Balance Sheets
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right of use assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Cost method investment | ||||||||
| Security deposits | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Customer deposits | ||||||||
| Current portion of financing lease obligations | ||||||||
| Current portion of operating lease obligations | ||||||||
| Current portion of notes payable | ||||||||
| Total Current Liabilities | ||||||||
| Long-term Liabilities | ||||||||
| Financing lease obligations, net of current portion | ||||||||
| Operating lease obligations, net of current portion | ||||||||
| Notes payable, net of current portion | ||||||||
| Deferred tax liability | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock, par value $, shares authorized, and shares issued and outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements
| 4 |
AmpliTech Group, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| For The Three Months Ended | For The Nine Months Ended | |||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Loss From Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expenses) | ||||||||||||||||
| Loss on investment in digital assets | ( | ) | ||||||||||||||
| Unrealized gain on investments | ||||||||||||||||
| Realized gain on investments | ||||||||||||||||
| Interest Income (expense), net | ( | ) | ( | ) | ( | ) | ||||||||||
| Total Other Income (Expenses) | ( | ) | ( | ) | ||||||||||||
| Net Loss Before Income Taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision For Income Taxes | ||||||||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net Loss Per Share; | ||||||||||||||||
| Basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted Average Common Shares Outstanding; | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
See accompanying notes to the condensed consolidated financial statements
| 5 |
AmpliTech Group, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
| For The Three Months Ended September 30, 2024 | ||||||||||||||||||||
| Common Stock | Additional | Total | ||||||||||||||||||
| Number of | Par | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||
| Shares | Value | Capital | Deficit | Equity | ||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation | - | |||||||||||||||||||
| Common stock issued for vesting of RSU’s | ( | ) | ||||||||||||||||||
| Common stock issued in offering | ||||||||||||||||||||
| Net loss for the three months ended September 30, 2024 | - | ( | ) | ( | ) | |||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| For The Nine Months Ended September 30, 2024 | ||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation | - | |||||||||||||||||||
| Common stock issued for vesting of RSU’s | ( | ) | ||||||||||||||||||
| Common stock issued in offering | ||||||||||||||||||||
| Net loss for the nine months ended September 30, 2024 | - | ( | ) | ( | ) | |||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| For the Three Months Ended September 30, 2023 | ||||||||||||||||||||
| Common Stock | Additional | Total | ||||||||||||||||||
| Number of | Par | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||
| Shares | Value | Capital | Deficit | Equity | ||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation | - | |||||||||||||||||||
| Common stock issued for vesting of RSU’s | ( | ) | ||||||||||||||||||
| Net loss for the three months ended September 30, 2023 | - | ( | ) | ( | ) | |||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| For The Nine Months Ended September 30, 2023 | ||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation | - | |||||||||||||||||||
| Common stock issued for vesting of RSU’s | ( | ) | ||||||||||||||||||
| Net loss for the nine months ended September 30, 2023 | - | ( | ) | ( | ) | |||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to the condensed consolidated financial statements
| 6 |
AmpliTech Group, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For The Nine Months Ended | ||||||||
| September 30, | September 30, | |||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Operating lease costs | ||||||||
| Stock based compensation | ||||||||
| Amortization of debt discount | ||||||||
| Gain on termination of right-of-use operating lease | ( | ) | ||||||
| Inventory reserve | ||||||||
| Change in fair value of marketable securities | ( | ) | ||||||
| Loss on investment of digital assets | ||||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Security deposits | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Operating lease obligations | ( | ) | ( | ) | ||||
| Customer deposits | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net investment in marketable securities | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Net proceeds from issuance of common shares in a private equity offering | ||||||||
| Net proceeds from notes payable | ||||||||
| Repayment on financing lease liabilities | ( | ) | ( | ) | ||||
| Repayment of notes payable | ( | ) | ( | ) | ||||
| Payment of revenue earnout | ( | ) | ||||||
| Net cash from (used in) financing activities | ( | ) | ||||||
| Net change in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and Cash Equivalents, Beginning of the Period | ||||||||
| Cash and Cash Equivalents, End of the Period | $ | $ | ||||||
| Supplemental disclosures: | ||||||||
| Cash paid for interest expense | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-Cash Investing and Financing Activities: | ||||||||
| Common Stock issued on vesting of RSUs | $ | $ | ||||||
| Gain on termination of right-of-use operating lease | $ | $ | ||||||
| Disposal of property and equipment | $ | $ | ||||||
| Debt Discount on notes payable | $ | $ | ||||||
| Operating lease right-of-use asset and liability measurement | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements
| 7 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
(1) Organization and Business Description
AmpliTech
Group, Inc. (“AmpliTech” or the “Company”) was incorporated under the laws of the State of Nevada on December
30, 2010. On August 13, 2012, the Company acquired AmpliTech, Inc., by issuing shares of the Company’s common stock to
the shareholders of AmpliTech, Inc. in exchange for
AmpliTech designs, engineers and assembles microwave component based low noise amplifiers (“LNA”) that meet individual customer specifications. Application of the Company’s proprietary technology results in maximum frequency gain with minimal background noise distortion as required by each customer. The Company has both domestic and international customers in such industries as aerospace, governmental, defense and commercial satellite.
On September 12, 2019, AmpliTech Group, Inc. acquired the assets of Specialty Microwave Corporation (“Specialty”), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and all intellectual property. The assets also included all eight team members of Specialty.
Specialty designs and manufactures passive microwave components and related subsystems that meet individual customer specifications for both domestic and international customers for use in satellite communication ground networks.
On
February 17, 2021, AmpliTech Group, Inc., common stock and warrants under the symbols “AMPG” and “AMPGW”, respectively,
commenced trading on NASDAQ. A reverse split of the outstanding common stock at a
In 2021, the Company opened AGMDC, a monolithic microwave integrated circuits (“MMIC”) chip design center in Texas and has started to implement several of its proprietary amplifier designs into MMIC components. MMICs are semiconductor chips used in high-frequency communications applications. MMICs are widely desired for power amplification solutions to service emerging technologies, such as phased array antennas and quantum computing. MMICs carry a smaller footprint enabling them to be incorporated into a broader array of systems while reducing costs. AGMDC designs, develops and manufactures state-of-the-art signal processing components for satellite and 5G communications networks, defense, space and other commercial applications, allowing the Company to market its products to a wider base of customers requiring high technology in smaller packages.
| 8 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
On November 19, 2021, AmpliTech Group, Inc. entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Spectrum Semiconductor Materials Inc. (the “Seller” or “SSM”), pursuant to which AmpliTech would acquire substantially all the assets of the Company (the “Acquisition”). The Acquisition was completed on December 15, 2021.
Spectrum Semiconductor Materials (“SSM”), located in Silicon Valley (San Jose, CA), is a global authorized distributor of integrated circuit (“IC”) packaging and lids for semiconductor device assembly, prototyping, testing, and production requirements.
In August 2022, AmpliTech Group’s True G Speed Services (AGTGSS) division was founded to serve and provide complete system integration and ORAN compliant O-RU’s (Radio Units) for telcos, enabling the industry to access ‘True 5G Speeds’. AGTGSS provides Managed Services, Cyber Security, Cloud Services, Data Sciences and Telco Cloud Services. AGTGSS will also be providing full installation of Private 5G Networks (P5G) which includes the deployment of AmpliTech Group’s developed radio units. AGTGSS will implement AmpliTech’s low noise amplifier devices in these systems to promote greater coverage, longer range and faster speeds.
(2) Loss on Investment of Digital Assets
During
the three months ended March 31, 2024, the Company made several transactions in digital currency in the total amount of approximately
$
As
a result of the fraudulent digital currency transactions noted above, the Company was a victim of a cyber phishing scam that defrauded
the Company. During the nine months ended September 30, 2024, the Company recorded a complete loss from the investment in digital assets
of $
| 9 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
(3) Summary of Significant Accounting Policies
Basis of Accounting
The accompanying condensed consolidated financial statements have been prepared using the accrual basis of accounting.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods presented. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers deposits that can be redeemed on demand and investments and marketable securities that have original maturities of less than three months, when purchased, to be cash equivalents. As of September 30, 2024 the Company’s cash and cash equivalents were deposited in four financial institutions.
The
Company’s policy is to place its cash and cash equivalents with high-quality, major financial and investment institutions to limit
the amount of credit exposure. Accounts at each financial institution are insured by the Federal Deposit Insurance Corporation (“FDIC”)
up to $
Accounts Receivable
Accounts receivable consist of trade receivables arising from credit sales to customers in the normal course of business. These receivables are recorded at the time of sale, net of an allowance for current expected credit losses. In accordance with ASC Topic 326, “Financial Instruments – Credit Losses,” the Company estimates expected credit losses based on historical bad debt experience, the aging of accounts receivable, the current creditworthiness of our customers, prevailing economic conditions, and reasonable and supportable forward-looking information.
An
allowance of $
| 10 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
Inventories
Inventories, which consist primarily of raw materials, work in progress and finished goods, are stated at the lower of cost (first-in, first-out basis) or market (net realizable value).
Inventory quantities and related values are analyzed at the end of each fiscal quarter to determine those items that are slow moving and obsolete. An inventory reserve is recorded for those items determined to be slow moving with a corresponding charge to cost of goods sold. Inventory items that are determined obsolete are written off currently with a corresponding charge to cost of goods sold.
As
of September 30, 2024 and December 31, 2023 the reserve for inventory obsolescence was $
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements.
Property and equipment are depreciated as follows:
| Description | Useful Life | Method | ||
| Office equipment | ||||
| Machinery/shop equipment | ||||
| Computer equipment/software | ||||
| Vehicles | ||||
| Leasehold improvements |
Intangible Assets
Definite-lived intangible assets including customer relationships and intellectual property are subject to amortization. Intangible assets are amortized over their estimated useful life on a straight-line basis. Estimated useful lives are determined considering the period the assets are expected to contribute to future cash flows. Indefinite-lived intangible assets are not subject to amortization.
Intangible assets are amortized as follows:
| Description | Useful Life | Method | ||
| Trade names | Indefinite | N/A | ||
| Customer relationships | ||||
| Intellectual property |
| 11 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
Long-Lived Assets
The Company reviews the carrying value of long-lived assets such property and equipment, right-of-use (“ROU”) assets, and definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Circumstances which could trigger a review include, but are not limited to; significant decrease in the market price of the asset; significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
The
recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future
cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the
asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount of
fair value less costs to sell and would no longer be depreciated. The depreciable basis of assets that are impaired and continue in use
is their respective fair values. During the nine months ended September 30, 2024 and the year ended December 31, 2023, there were
Goodwill and Indefinite-Lived Intangible Assets
We follow the acquisition method of accounting to record the assets and liabilities of acquired businesses at their estimated fair value at the date of acquisition. We initially record goodwill for the amount the consideration transferred exceeds the acquisition-date fair value of net tangible and identifiable intangible assets acquired.
Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are tested for impairment annually on December 31, or more frequently when events or circumstances indicate an impairment may have occurred. When assessing the recoverability of goodwill and indefinite-lived intangible assets, the Company may first assess qualitative factors in determining whether it is more likely than not that the fair value of a reporting unit, including goodwill, or an indefinite-lived intangible asset is less than its carrying amount. The qualitative assessment is based on several factors, including the current operating environment, industry and market conditions, and overall financial performance. The Company may elect to bypass this qualitative assessment for some or all of its reporting units or other indefinite-lived intangible assets and perform a quantitative assessment, based on management’s judgment.
If we quantitatively test goodwill and indefinite-lived intangible assets for possible impairment, we calculate the fair value for the reporting unit and indefinite-lived assets and compare the amount to their carrying amount. If the fair value of a reporting unit and indefinite-lived asset exceeds their carrying amount, the reporting unit and indefinite-lived assets are not considered impaired. If the carrying amount of the reporting unit and indefinite-lived assets exceed their fair value, the reporting unit and indefinite-lived assets are considered to be impaired, and an impairment charge is recognized for the difference.
| 12 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
We estimate the fair value of our reporting units and indefinite-lived intangible assets based on the present value of estimated future cash flows. Considerable management judgment is necessary to evaluate the impact of operating and macroeconomic changes and to estimate the future cash flows used to measure fair value. Our estimates of future cash flows consider past performance, current and anticipated market conditions and internal projections and operating plans. Additional assumptions include forecasted growth rates, estimated discount rates, and estimated royalty rates for our indefinite-lived intangible assets.
During
the nine months ended September 30, 2024 and the year ended December 31, 2023, there were
Investment Policy-Cost Method
Investments
consist of non-controlling equity investments in privately held companies. The Company elected the measurement alternative for these
investments without readily determinable fair values and for which the Company does not control or have the ability to exercise considerable
influence over operating and financial policies. These investments are accounted for under the cost method of accounting. Under the cost
method of accounting, the non-marketable equity securities are carried at cost less any impairment, adjusted for observable price changes
of similar investments of the same issuer. Fair value is not estimated for these investments if there are no identified events or changes
in circumstances that may influence the fair value of the investment. Under this method, the Company’s share of the earnings or
losses of such investee companies is not included in the consolidated balance sheet or consolidated statements of operations. The Company
held $
Investment in Digital Assets
We account for all digital assets as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. The Company presents digital assets separately from other intangible assets, recorded as digital assets on the condensed consolidated balance sheets. The digital assets are initially recorded at cost and are subsequently remeasured at cost, net of any impairment losses incurred since acquisition.
We performed an analysis this quarter to identify whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges, indicate that it is more likely than not that our digital assets are impaired. In determining if an impairment has occurred, we consider the lowest market price of one unit of digital asset quoted on the active exchange since acquiring the digital asset. When the then current carrying value of a digital asset exceeds the fair value determined each quarter, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the prices determined. Gains are not recorded until realized upon sale(s), at which point they are presented net of any impairment losses for the same digital assets. In determining the gain to be recognized upon sale, we calculate the difference between the sales price and carrying value of the digital assets sold immediately prior to sale.
| 13 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
Leases
We lease property and equipment under finance and operating leases. For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the lease term. The Company has elected not to separate lease and non-lease components for all property leases for the purpose of calculating ROU assets and lease liabilities. Many of our leases include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when appropriate. When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis considering such factors as lease term and economic environment risks.
Revenue Recognition
We sell our products through a combination of a direct sales force in the United States and independent sales representatives in international markets. Revenue is recognized when a customer obtains control of promised goods based on the consideration we expect to receive in exchange for these goods. This core principle is achieved through the following steps:
Identify the contract with the customer. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We do not have significant costs to obtain contracts with customers. For commissions on product sales, we have elected the practical expedient to expense the costs as incurred.
Identify the performance obligations in the contract. Our contracts with customers do not include multiple performance obligations to be completed over a period.
Our performance obligations relate to delivering single-use products to a customer, subject to the shipping terms of the contract. Limited warranties are provided, under which we typically accept returns and provide either replacement parts or refunds.
We do not have significant returns. We do not typically offer extended warranty or service plans.
| 14 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
Determine the transaction price. Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. None of our contracts as of September 30, 2024 contained a significant financing component. Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns, rebates, discounts, and other adjustments. The estimates of variable consideration are based on historical payment experience, historical and projected sales data, and current contract terms. Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.
Allocate the transaction price to performance obligations in the contract. We typically do not have multiple performance obligations in our contracts with customers. We recognize revenue upon transfer of the product to the customer’s control at contractually stated pricing.
Recognize revenue when or as we satisfy a performance obligation. We generally satisfy performance obligations at a point in time upon either shipment or delivery of goods, in accordance with the terms of each contract with the customer. We do not have significant service revenue.
Cost of Sales
We include product costs such material, direct labor, overhead costs, production-related depreciation expense, outside labor and production supplies in cost of sales.
Shipping and Handling
Shipping and handling charges are generally incurred at the customer’s expense. However, when billed to our customers, shipping and handling charges are included in net sales for the applicable period, and the corresponding shipping and handling expense is reported in cost of sales.
Research and Development
Research and development expenditures are charged to operations as incurred. The major components of research and development costs include payroll, consultants, outside service, and supplies.
Research
and development costs for the nine months ended September 30, 2024 and 2023, were $
| 15 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
Income Taxes
The Company’s deferred tax assets and liabilities for the expected future tax consequences of events have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of certain assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At September 30, 2024 and December 31, 2023, the Company had no material unrecognized tax benefits.
Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is calculated by adjusting the weighted average number of shares of common stock outstanding for the dilutive effect, if any, of common stock equivalents. Common stock equivalents whose effect would be anti-dilutive are not included in diluted earnings (loss) per share. The Company uses the treasury stock method to determine the dilutive effect, which assumes that all common stock equivalents have been exercised at the beginning of the period and that the funds obtained from those exercises were used to repurchase shares of common stock of the Company at the average closing market price during the period. As of September 30, 2024 and 2023, there were and , respectively, potential common share equivalents from stock options excluded from the diluted loss per share calculations as their effect is anti-dilutive.
Fair Value Measurements
The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined in the following three categories:
Level 1: Unadjusted quoted prices that are available in active markets for identical assets or liabilities at the measurement date.
Level 2: Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly.
Level 3: Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment.
| 16 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
Cash and cash equivalents, receivables, inventories, prepaid expenses, accounts payable, accrued expenses, and customer deposits approximate fair value, due to their short-term nature. The carrying value of notes payable and short and long-term debt also approximates fair value since these instruments bear market rates of interest.
Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to long-lived assets, intangible assets, and goodwill, which are remeasured when the derived fair value is below carrying value in the consolidated balance sheets.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employees required service period, which is generally the vesting period.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents, marketable securities and accounts receivable.
The Company places its cash and cash equivalents and marketable securities with high-quality, major financial and investment institutions in order to limit the amount of credit exposure. For accounts receivable, the Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures by requiring; (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. These amendments are to be applied prospectively, with retrospective application permitted. We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.
| 17 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about reportable segment’s profit or loss and assets that are currently required annually. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company has adopted this pronouncement and does not expect the adoption to have a material impact on our results of operation, financial position or cash flow.
In August 2023, the FASB issued ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, which requires a newly-formed joint venture to apply a new basis of accounting to its contributed net assets, resulting in the joint venture initially measuring its contributed net assets at fair value on the formation date. ASU 2023-05 is effective for all joint venture formations with a formation date on or after January 1, 2025, with early adoption permitted. These amendments are to be applied prospectively, with retrospective application permitted for joint ventures formed before the effective date. We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.
(4) Revenues
The following table presents sales disaggregated based on geographic regions and for the three and nine months ended:
| Three months ended | ||||||||
| Sept. 30, 2024 | Sept. 30, 2023 | |||||||
| AmpliTech Inc. and Specialty Microwave | ||||||||
| Domestic sales | $ | $ | ||||||
| International sales | ||||||||
| Total sales | $ | $ | ||||||
| Spectrum | ||||||||
| Domestic sales | $ | $ | ||||||
| International sales | ||||||||
| Total sales | $ | $ | ||||||
| Total sales | $ | $ | ||||||
| 18 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
| Nine months ended | ||||||||
| Sept. 30, 2024 | Sept. 30, 2023 | |||||||
| AmpliTech Inc. and Specialty Microwave | ||||||||
| Domestic sales | $ | $ | ||||||
| International sales | ||||||||
| Total sales | $ | $ | ||||||
| Spectrum | ||||||||
| Domestic sales | $ | $ | ||||||
| International sales | ||||||||
| Total sales | $ | $ | ||||||
| Total sales | $ | $ | ||||||
(5) Segment Reporting
ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments. The Company has two reportable segments, the manufacturing and engineering segment, which is operated by AmpliTech Inc. and Specialty Microwave: and the distribution segment, which is operated by Spectrum. The manufacturing and engineering segment assembles microwave components, and the distribution segment is a global distributor of integrated circuits packages and lids. The Company provides general corporate services to its segments; however, these services are not considered when making operating decisions and assessing segment performance. These services are reported under “Corporate” below and include costs associated with executive management, financing activities and public company compliance.
The following table presents summary information by segment for the three months ended September 30, 2024:
| Manufacturing and Engineering | Distribution | Corporate | Total | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ||||||||||
| Total Assets | ||||||||||||||||
| Depreciation and Amortization | ||||||||||||||||
| Interest Expense, net | ||||||||||||||||
| 19 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
The following table presents summary information by segment for the nine months ended September 30, 2024:
| Manufacturing and Engineering | Distribution | Corporate | Total | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Net Income (Loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Total Assets | ||||||||||||||||
| Depreciation and Amortization | ||||||||||||||||
| Interest Expense, net | ||||||||||||||||
(6) Inventories
The inventory consists of the following at September 30, 2024 and December 31, 2023:
| September 30, 2024 | December 31, 2023 | |||||||
| Raw Materials | $ | $ | ||||||
| Work-in Progress | ||||||||
| Finished Goods | ||||||||
| Subtotal | $ | $ | ||||||
| Less: Reserve for Obsolescence | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
(7) Property and Equipment
Property and Equipment consisted of the following at September 30, 2024 and December 31, 2023:
| September 30, 2024 | December 31, 2023 | |||||||
| Lab Equipment | $ | $ | ||||||
| Manufacturing Equipment | ||||||||
| Automobiles | ||||||||
| Computer Equipment and Software | ||||||||
| Leasehold Improvements | ||||||||
| Furniture and Fixtures | ||||||||
| Subtotal | ||||||||
| Less: Accumulated Depreciation | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
Depreciation expense for the three months
ended September 30, 2024 and 2023 was $
| 20 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
Depreciation
expense for the nine months ended September 30, 2024 and 2023 was $
Property
and equipment purchased in the amount of $
Disposal
of property and equipment as of September 30, 2024 was $
(8) Goodwill and Intangible Assets
Goodwill
Goodwill
is related to the acquisition of Spectrum Semiconductor Materials Inc. on December 15, 2021. Goodwill is primarily related to expected
improvements and technology performance and functionality, as well as sales growth from future product and service offerings and new
customers, together with certain intangible assets that do not qualify for separate recognition. Goodwill is generally not amortizable
for tax and financial statement purposes. As of September 30, 2024 and December 31, 2023, goodwill was $
Other Intangible Assets
Intangible assets consisted of the following at September 30, 2024:
| Gross Carrying Amount | Accumulated Amortization | Net | Weighted Average Life | |||||||||||||
| Trade name | $ | $ | $ | Indefinite | ||||||||||||
| Customer relationships | ||||||||||||||||
| Intellectual Property | ||||||||||||||||
| Total | $ | $ | $ | |||||||||||||
Amortization
expense for the three months ended September 30, 2024 and 2023 was $
Amortization
expense for the nine months ended September 30, 2024 and 2023 was $
| 21 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
Annual amortization of intangible assets are as follows:
| 2024 remaining | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| $ |
(9) Cost Method Investment
On
June 10, 2021, the Company entered into a membership interest purchase agreement with SN2N, LLC for an aggregate purchase price of $
| 22 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
(10) Leases
The following was included in our balance sheet as of September 30, 2024:
| September 30, 2024 | ||||
| Operating leases | ||||
| Assets | ||||
| ROU operating lease assets | $ | |||
| Liabilities | ||||
| Current portion of operating lease | $ | |||
| Operating lease, net of current portion | $ | |||
| Total operating lease liabilities | $ | |||
| Financing leases | ||||
| Assets | ||||
| Property and equipment, gross | $ | |||
| Accumulated depreciation | ( | ) | ||
| Property and equipment, net | $ | |||
| Liabilities | ||||
| Current portion of financing lease | $ | |||
| Financing lease, net of current portion | $ | |||
| Total financing lease liabilities | $ | |||
| 23 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
The weighted average remaining lease term and weighted average discount rate at September 30, 2024 are as follows:
| Weighted average remaining lease term (years) | September 30, 2024 | |||
| Operating leases | ||||
| Financing leases | ||||
| Weighted average discount rate | ||||
| Operating leases | % | |||
| Financing leases | % | |||
| 24 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
Operating Leases
On
September 12, 2019,
On
November 27, 2019, the Company entered a 39-month agreement to lease an automobile with a monthly payment of $
On
December 15, 2021, the Company assumed the SSM lease agreement for office and warehouse space in San Jose, CA, with the same terms and
conditions. Effective February 1, 2020, the lease term will expire on
On
October 15, 2021, the Company entered a new lease for a
On
January 15, 2024, the Company entered a triple net lease agreement for a
| 25 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
The following table reconciles future minimum operating lease payments to the discounted lease liability as of September 30, 2024:
| 2024 remaining | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less imputed interest | ( | ) | ||
| Total lease obligations | ||||
| Less current obligations | ( | ) | ||
| Long-term lease obligations | $ |
Financing Lease
The following table reconciles future minimum financing lease payments to the discounted lease liability as of September 30, 2024:
| 2024 remaining | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total lease payments | ||||
| Less imputed interest | ( | ) | ||
| Total lease obligations | ||||
| Less current obligations | ( | ) | ||
| Long-term lease obligations | $ |
(11) Notes Payable
Promissory Note:
On
September 12, 2019, AmpliTech Group, Inc. acquired Specialty, a privately held company based in Ronkonkoma, NY. The purchase included
all inventory, orders, customers, property and equipment, and all intellectual property. The assets also included all eight team members
of Specialty. The total consideration paid was $
| 26 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
Loan Payable:
On
September 12, 2019, the Company was approved for a $
| ● | On
May 14, 2020, the Company borrowed $ |
| ● | On
June 10, 2020, the Company borrowed $ |
As
of March 14, 2023, the Company closed the equipment line of credit of $
In
January 2022, the Company purchased machinery for $
On
July 23, 2024, the Company entered into a business loan and security agreement with Altbanq Lending II LLC in the amount of $
Future principal payments over the term of the loans as of September 30, 2024 are as follows:
| Payments | ||||
| 2024 remaining | $ | |||
| 2025 | ||||
| 2026 | ||||
| Discount | ( | ) | ||
| Total remaining payments | $ | |||
| 27 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
(12) Stockholders’ Equity
The total number of shares of stock this Corporation is authorized to issue shall be five hundred one million shares, par value $ per share. Our authorized capital stock consists of shares of common stock and shares of blank check preferred stock.
Preferred Stock
On July 10, 2013, the Board of Directors of the Company approved a certificate of amendment to the articles of incorporation and changed the authorized capital stock of the Company to include and authorize shares of Preferred Stock, par value $ per share. On October 7, 2020, the Board of Directors of the Company approved a certificate of amendment to the articles of incorporation and changed the total number of authorized shares of Preferred Stock to shares, $ per share.
On October 7, 2020, our Board of Directors and our stockholders approved a resolution to amend and restate the certificate of designation of preferences, rights and limitations of Series A Convertible Preferred Stock to restate that there are shares of the Company’s blank check Preferred Stock designated as Series A Convertible Preferred Stock. The amended and restated certificate clarifies that the Series A Convertible Preferred Stock convert at a rate of five shares of the Company’s common stock for every share of Series A Convertible Preferred Stock, and also restates that the Series A Convertible Preferred Stock shall be entitled to vote on all matters submitted to shareholders of the Company for each share of Series A Convertible Preferred Stock owned on the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, on the date such vote is taken, or any written consent of shareholders is solicited. The number of votes entitled to be cast by the holders of the Series A Convertible Preferred Stock equals that number of votes that, together with votes otherwise entitled to be cast by the holders of the Series A Convertible Preferred Stock at a meeting, whether by virtue of stock ownership, proxies, voting trust agreements or otherwise, entitle the holders to exercise 51% of all votes entitled to be cast to approve any action which Nevada law provides may or must be approved by vote or consent of the holders of common stock entitled to vote.
| 28 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
Common Stock:
The Company originally authorized shares of common stock with a par value of $. Effective May 20, 2014, the Company increased its authorized shares of common stock from to .
On February 17, 2021, AmpliTech Group Inc., common stock and warrants under the symbols “AMPG” and “AMPGW”, respectively, commenced trading on NASDAQ.
On September 9, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a single institutional
investor for the sale by the Company of shares (the “Shares”) of the Company’s common stock, par value $
per share at a per share price of $. The closing of the offering occurred on September 11, 2024, subject to satisfaction
of customary closing conditions (the “Closing Date”). The gross proceeds to the Company from the offering was approximately
$
In connection with the
offering of the Shares, on September 9, 2024, the Company entered into a placement agency agreement with Maxim Group LLC (the “Placement
Agent”) pursuant to which the Company agreed to pay the Placement Agent an aggregate fee equal to
2020 Equity Incentive Plan:
In 2023, the Board and the shareholders adopted the Company’s Amended and Restated 2020 Equity Incentive Plan (the “Amended and Restated Plan”), effective as of December 11, 2023. The Amended and Restated Plan is substantially similar to the 2020 Plan except that it increases the shares of our common stock available for issuance thereunder to shares of common stock.
As of September 30, 2024, all outstanding stock options were issued according to the Company’s 2020 Plan, and there remains shares of common stock available for future issuance under the 2020 Plan.
Stock Options:
On January 9, 2024, the Company granted a consultant, ten-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. The stock options vested immediately, with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of %, risk-free rate of %, and no forfeiture rate.
On January 16, 2024, the Company granted an employee ten-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over five years commencing on April 16, 2024, with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of %, risk-free rate of %, and no forfeiture rate.
| 29 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
On January 25, 2024, the Company granted an independent contractor ten-year stock options to purchase shares of common stock according to the Company’s 2020 Plan. stock options vested immediately and the balance of shall vest in equal quarterly installments over three years commencing on June 30, 2024, with an exercise price of $ per share. The Company has calculated these options estimated fair market value at $ using the Black-Scholes model, with the following assumptions: expected term of years, stock price of $, exercise price of $, volatility of %, risk-free rate of %, and no forfeiture rate.
Below is a table summarizing the changes in stock options outstanding for the nine months ended September 30, 2024:
| Number of | Weighted Average | |||||||
| Options | Exercise Price ($) | |||||||
| Outstanding at December 31, 2023 | $ | |||||||
| Granted | $ | |||||||
| Exercised | ||||||||
| Expired | ( | ) | $ | |||||
| Outstanding at September 30, 2024 | $ | |||||||
| Exercisable at September 30, 2024 | $ | |||||||
Stock-based compensation expense related to stock options of $ and $ was recorded for the three and nine months ended September 30, 2024. As of September 30, 2024, the remaining unrecognized compensation cost related to non-vested stock options is $ and is expected to be recognized over years. The outstanding stock options have a weighted average remaining contractual life of years and a total intrinsic value of $.
| 30 |
AmpliTech Group, Inc.
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2024 and 2023
Warrants:
Below is a table summarizing the changes in warrants outstanding for the nine months ended September 30, 2024:
| Number of | Weighted Average | |||||||
| Warrants | Exercise Price ($) | |||||||
| Outstanding at December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired | ||||||||
| Outstanding at September 30, 2024 | $ | |||||||
| Exercisable at September 30, 2024 | $ | |||||||
Stock-based compensation expense related to warrants of $ was recorded for the three and nine months ended September 30, 2024. As of September 30, 2024, the remaining unrecognized compensation cost related to non-vested warrants is $. The outstanding warrants have a weighted average remaining contractual life of years and a total intrinsic value of $.
Restricted Stock Units:
On
May 20, 2022, restricted stock units at an exercise price of $ were issued to a board advisor. Vesting will occur in equal
quarterly installments of
| Number of | Weighted Average | |||||||
| RSU’s | Exercise Price ($) | |||||||
| Outstanding at December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Exercised | ( | ) | $ | |||||
| Expired | ||||||||
| Outstanding at September 30, 2024 | $ | |||||||
Stock-based compensation expense related to restricted stock units of $and $was recorded for the three and nine months ended September 30, 2024. As of September 30, 2024, the remaining unrecognized compensation cost related to non-vested restricted stock units is $. The outstanding restricted stock units have a weighted average remaining contractual life of years and a total intrinsic value of $.
(13) Commitments and Contingencies
On July 26, 2024, the Company’s AGTGSS division
entered into a licensing product agreement. Under the terms of the agreement, the licensor agreed to an exclusive United States distribution
and global licensing rights for certain 5G telecom equipment for 18 months for the purpose of marketing, selling, renting, deployment
and maintenance of the licensed products with the Company. For services, the Company will pay the Licensor certain software IP license
fees in the amount of $
| 31 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis contain forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.
Business Overview
AmpliTech Group Inc. (“AMPG,” “AmpliTech” or the “Company”), incorporated in 2010 in the state of Nevada, is the parent company of its subsidiary, AmpliTech, Inc., and the Company’s divisions Specialty Microwave, Spectrum Semiconductor Materials, AmpliTech Group MMIC Design Center (“AGMDC”) and AmpliTech Group True G Speed Services (‘AGTGSS”).
AmpliTech, Inc. designs, engineers, and assembles 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.
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.
AGMDC designs, develops and manufactures state-of-the-art signal processing components for satellite and 5G communications networks, defense, space and other commercial applications, allowing the Company to market its products to wider base of customers requiring high technology in smaller packages.
Spectrum Semiconductor Materials (“SSM”), located in Silicon Valley (San Jose, CA), is a global authorized distributor of integrated circuit (“IC”) packaging and lids for semiconductor device assembly, prototyping, testing, and production requirements.
In August 2022, we formed our AGTGSS division to enable “true G speeds” to the industry. AGTGSS’ main function will be to plan and configure 5G radio systems and make them O-RAN compliant. AGTGSS will implement AmpliTech’ s low noise amplifier devices in these systems to promote greater coverage, longer range and faster speeds.
Our mission is to patent our proprietary IP and trade secrets that were used in small volume niche markets and expand our capabilities through strategic partnerships, joint ventures, mergers/acquisitions with key industry leaders in the 5G/6G, quantum computing, and cybersecurity markets. We believe this will enable us to scale up our products and revenue by developing full systems and subsystems with our unique technology as a core component, which we expect will position us as a global leader in these rapidly emerging technology sectors and addresses large volume markets as well, such as cellphone handsets, laptops, server networks, and many other applications that improve everyday quality of life.
The Company’s research and development initiative to expand its product line of low noise amplifiers to include its new 5G and wireless infrastructure products and MMIC designs is progressing significantly. Our combined engineering and manufacturing resources are expected to complement the development of new subsystems for satellite, wireless, and 5G infrastructure, as well as advanced military and commercial markets.
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Loss on Investment of Digital Assets
During the three months ended March 31, 2024, the Company made several transactions in digital currency in the total amount of approximately $3.25 million. The Company believes that it was fraudulently induced to hold its digital currency with a custodian whom the Company believed to be valid, but no longer exists. The Company is taking steps in an attempt to seek recovery of the funds including discussions with local, federal, and international law enforcement agencies and private consultants and is currently conducting a review of its processes and procedures related to this investment. At the present time, the Company is not aware of, and does not expect any additional losses arising out or relating to the above-described investment. In addition, the Company does not believe that the Company’s systems, records, or other assets were otherwise affected or compromised in connection with these investments.
As a result of the fraudulent digital currency transactions noted above, the Company was a victim of a cyber phishing scam that defrauded the Company. During the nine months ended September 30, 2024, the Company recorded a complete loss from the investment in digital assets of $3,248,911. As of September 30, 2024, the remaining balance of digital assets was $0.
Corporate Information
Our principal executive offices are located at 155 Plant Avenue, Hauppauge, NY 11788. Our telephone number is (631) 521-7831. Our corporate website is www.amplitechinc.com. The information on our website is not a part of, or incorporated in, this prospectus.
Results of Operations
For the Three Months Ended September 30, 2024 and September 30, 2023
Revenues
Sales decreased from $3,387,169 for the three months ended September 30, 2023, to $2,834,512 for the three months ended September 30, 2024, a decrease of $552,657 or approximately 16.32%. Sales in the amplifier and related passive microwave components and subsystems division decreased by $819,124, or 51.81%, while Spectrum sales increased by $266,467, or 14.75%. Overall, this decline is attributable to a decrease in sales from both domestic and international customers because of global economic uncertainty. The global recession and adverse market conditions are affecting our business in terms of lost revenue.
Cost of Goods Sold and Gross Profit
Cost of goods sold decreased from $1,904,388 for the three months ended September 30, 2023, to $1,486,583 for the three months ended September 30, 2024, a decrease of $417,805 or 21.94%. Overall, this decrease is directly related to the decline in sales. As a result, gross profit was $1,347,929 for the three months ended September 30, 2024, compared to $1,482,781 for the three months ended September 30, 2023, a decrease of $134,852, or 9.10%. Overall, the Company maintained a healthy gross profit margin as a percentage of sales of 47.55% as compared to 43.78% for the three months ended September 30, 2023, an increase of 3.78%, amid inflationary pressures.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased to $1,864,245 for the three months ended September 30, 2024, from $1,984,452 for the three months ended September 30, 2023, a decrease of $120,207 or approximately 6.06%, as a result in the decrease in salaries, office expense and IR/PR, offset against the increase in legal and accounting expenses.
Research and Development Expenses
Research and development expenditures are charged to operations as incurred. The major components of research and development costs include salaries and benefits, consultants, outside service, and supplies.
Research and development costs for the three months ended September 30, 2024, and 2023, were $572,422 and $425,573 respectively, an increase of $146,849, or 34.51%, resulting from an increase in rent, moving expenses and software licensing.
Loss From Operations
As a result of the above, the Company reported a loss from operations of $1,088,738 and $927,244 for the three months ended September 30, 2024, and 2023, respectively, an increase of $161,494 or 17.42%.
Other Income (Expenses)
The Company recorded interest expense, net of $100,945 and $750 for the three months ended September 30, 2024, and 2023, respectively, an increase of $100,195 because of the debt financing obtained during the quarter.
Due to market fluctuations, the Company recorded an unrealized gain on investments of $4,098 and a realized gain on investments of $36,187 for the three months ended September 30, 2023.
Net Loss
The Company reported a net loss of $1,189,683 and $887,709 for the three months ended September 30, 2024 and 2023, an increase of $301,974, or 34.02%.
For the Nine Months Ended September 30, 2024 and September 30, 2023
Revenues
Sales decreased from $11,572,699 for the nine months ended September 30, 2023, to $7,655,285 for the nine months ended September 30, 2024, a decrease of $3,917,414 or approximately 33.85%. Sales in the amplifier and related passive microwave components and subsystems division decreased by $2,000,769, or 43.82%. Spectrum sales decreased by $1,916,645, or 27.35%. This decrease in sales is attributable to the decrease in global demand and recessionary market dynamics affecting most of our customers across all divisions and product lines.
Cost of Goods Sold and Gross Profit
Cost of Goods Sold decreased from $6,305,928 for the nine months ended September 30, 2023, to $4,367,639 for the nine months ended September 30, 2024, a decrease of $1,938,289 or 30.74%. Overall, this decrease is directly related to the decline in sales. As a result, gross profit was $3,287,646 for the nine months ended September 30, 2024, compared to $5,266,771 for the nine months ended September 30, 2023, a decrease of $1,979,125 or 37.58%. Overall, gross profit as a percentage of sales decreased from 45.51% to 42.95%, or 2.56%.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $6,063,047 for the nine months ended September 30, 2024, from $5,677,778 for the nine months ended September 30, 2023, an increase of $385,269 or approximately 6.79%. This increase represents primarily an increase in legal, consulting and accounting fees, offset against the decrease in trade show expenses, employee benefits and IR/PR.
Research and Development Expenses
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, 2024, and 2023, were $1,309,299 and $1,643,458, respectively, a decrease of $344,159 or 20.33%, resulting from a decrease in consulting/foundry expenses as the major MMIC development efforts have been completed offset against an increase in rent, moving expenses and software licensing.
Loss From Operations
As a result of the above, the Company reported a loss from operations of $4,084,700 and $2,054,465 for the nine months ended September 30, 2024 and 2023, respectively, an increase of $2,030,235, or 98.82%.
Other Income (Expenses)
The Company recorded net interest expense of $113,472 and net interest income of $20,335 for the nine months ended September 30, 2024 and 2023, an increase of $133,807, or 658.01%. Interest expense increased as a result of the debt financing obtained during the quarter.
Due to market fluctuations, the Company recorded a realized gain on investments of $25,965 and $49,994 for the nine months ended September 30, 2024 and 2023, respectively. In addition, the Company recorded an unrealized gain on investments of $41,700 for the nine months ended September 30, 2023.
As a result of the fraudulent digital currency transactions noted above, during the nine months ended September 30, 2024, the Company recorded an impairment loss of $3,248,911 related to digital assets.
Net Loss
The Company reported a net loss of $7,421,118 and $1,942,436 for the nine months ended September 30, 2024 and 2023, respectively, an increase of $5,478,682, or 282.05%.
Cash Flow
Operating Activities
The net cash used in operating activities for the nine months ended September 30, 2024, was $4,128,869 resulting primarily from the net loss and operating changes in accounts receivable, inventories, prepaid expenses, accounts payable and accrued expenses, customer deposits and operating lease obligations.
The net cash used in operating activities for the nine months ended September 30, 2023 was $1,766,090 resulting primarily from the net loss and operating changes in accounts receivable, inventories, prepaid expenses, accounts payable and accrued expenses, operating lease liability and customer deposits
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Investing Activities
The net cash used in investing activities for the nine months ended September 30, 2024, was $3,275,342 of which $26,431 related to the purchase of equipment and $3,248,911 related to investment in marketable securities.
The net cash used in investing activities for the nine months ended September 30, 2023, was $3,739,714 of which $931,692 related to the purchase of equipment and $2,808,022 for the net purchases of marketable securities.
Financing Activities
The net cash from financing activities for the nine months ended September 30, 2024, was $1,754,735, resulting primarily from the net proceeds received from the issuance of common stock and notes payable, offset with the repayments of notes payable and financing lease liabilities.
The net cash used in financing activities for the nine months ended September 30, 2023, was $2,326,712, resulting primarily from the repayments of notes payable, financing lease liabilities, and the revenue earnout.
As of September 30, 2024, we had cash and cash equivalents of $1,076,537 working capital of $10,072,061 and an accumulated deficit of $17,190,841.
As of December 31, 2023, we had cash and cash equivalents of $6,726,013, working capital of $15,649,254, and an accumulated deficit of $9,769,723.
Operating Capital and Capital Expenditure Requirements
As of September 30, 2024, we had an accumulated deficit of $17.2 million. We expect to generate operating losses and negative operating cash flows for the remainder of the year and into early next quarter of 2025, although we anticipate that our operating losses to be reduced by revenue from new products that were developed earlier this year. As of September 30, 2024, we maintain cash and cash equivalents of $1.1 million. Based on our existing cash and cash equivalents, our working capital, our current and forecasted level of operations, and our forecasted cash flows, we believe that we will be able to meet our obligations and repay our liabilities arising from normal business operations when they come due and to provide for our capital requirements for the next 12 months. We are actively seeking dilutive or non-dilutive capital to support our growth.
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 judgment and estimates.
The discussion and analysis of our financial condition and results of operations is based upon financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates, including the allowance for doubtful accounts, the salability and recoverability of inventory, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes there have been no significant changes during the nine-month period ended September 30, 2024, 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, 2023.
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We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when we deem it necessary.
Off Balance Sheet Transactions
None.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Smaller reporting companies are not required to provide the information required by this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, including our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Our management does not expect that our disclosure controls and procedures will prevent all error and all fraud. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Based on that evaluation, as of September 30, 2024, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes that have affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the period covered by this report. Please refer to the Form 10-Q for the quarter ended March 31, 2024 filed with the SEC on May 28, 2024 and our Form 10-Q for the quarter ended June 30, 2024 filed with the SEC on August 14, 2024.
We will continue to enhance corporate oversight over process-level controls and structures to ensure that there is appropriate assignment of authority, responsibility, and accountability to enable remediation of our material weaknesses. We believe that our remediation plan will be sufficient to rectify the identified material weaknesses and strengthen our internal control over financial reporting. As we continue to evaluate, and work to improve, our internal control over financial reporting, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
To the best of our knowledge, there are no pending legal proceedings to which we are a party or of which any of our property is the subject.
Item 1A. Risk Factors.
In addition to risk factors set forth below, you should carefully consider the risks set forth in the section captioned “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and Form 10-Q for the quarter ended March 31, 2024 and the quarter ended June 30, 2024, before making an investment decision. You should read the section captioned “Cautionary Statement Regarding Forward Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this report.
As of September 30, 2024, we had an accumulated deficit of $17.2 million. We expect to generate operating losses and negative operating cash flows for the remainder of the year and into early next quarter of 2025, although we anticipate that our operating losses to be reduced by revenue from new products that were developed earlier this year. As of September 30, 2024, we maintain cash and cash equivalents of $1.1 million. Based on our existing cash and cash equivalents, our working capital, our current and forecasted level of operations, and our forecasted cash flows, we believe that we will be able to meet our obligations and repay our liabilities arising from normal business operations when they come due and to provide for our capital requirements for the next 12 months. We are actively seeking dilutive or non-dilutive capital to support our growth.
The listing of our common stock on the Nasdaq Capital Market is contingent on our compliance with the Nasdaq Capital Market’s conditions for continued listing. On September 27, 2024, the Company received a notice (the “Notice”) from The NASDAQ Stock Market LLC indicating that the Company is not in compliance with the minimum bid price requirement of $1.00 per share under the Nasdaq Listing Rules (the “Listing Rules”). Based on the closing bid price of the Company’s listed securities for the last 30 consecutive business days from August 15, 2024 to September 26, 2024, the Company no longer meets the minimum bid price requirement set forth in Listing Rules 5550(a)(2). The Notice is only a notification of deficiency and has no current effect on the listing or trading of the Company’s securities on The Nasdaq Capital Market. The Notice states that under the Listing Rules 5810(c)(3)(A), the Company is provided with a compliance period of 180 calendar days, or until March 26, 2025, to regain compliance under the Listing Rules. To regain compliance under the Listing Rules, the Company’s common stock must be at least $1.00 for a minimum of ten consecutive business days. In the event the Company does not regain compliance by March 26, 2025, the Company may be eligible for additional time to regain compliance or may face delisting.
On July 23, 2024, the Company entered into a business loan and security agreement with Altbanq, in the amount of $1,300,000, with an origination fee of $26,000 and an original issue discount of $403,000. The loan is payable within 76 weeks through 38 bi-weekly payments of $44,816 and bears an annual interest rate of 21.2% with prepayment options. The loan is secured by the Company’s assets through an UCC filing. The balance as of September 30, 2024 was $1,139,429, net of the debt discount. Principal payments of $224,080 and $89,509 of interest expense were paid for the nine-month ended September 30, 2024. In the event the Company is unable to repay or defaults, Albanq will have a right to exercise its rights to the collateral as a secured party.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable
Item 5. Other Information.
None.
Item 6. Exhibits.
(a) Exhibits
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| AmpliTech Group, Inc. | ||
| Date: November 14, 2024 | By: | /s/ Fawad Maqbool |
| Fawad Maqbool | ||
President and Chief Executive Officer (Principal Executive Officer) | ||
| Date: November 14, 2024 | By: | /s/ Louisa Sanfratello |
Louisa Sanfratello Chief Financial Officer (Principal Financial and Accounting Officer) |
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