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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

☒   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

 

or

 

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to ________

 

Commission File Number 000-54355

 

AmpliTech Group, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

 

27-4566352

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

620 Johnson Avenue

Bohemia, NY 11716

(Address of principal executive offices) (Zip Code)

 

(631)-521-7831

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

NA

 

NA

 

NA

 

Indicate by check mark whether registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒   No o

 

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

o

Accelerated filer

o

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

o

 

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. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ☒

 

As of November 13, 2020 the registrant had 51,588,958 shares of common stock, par value $0.001 per share, issued and outstanding.

 

 

 

  

AMPLITECH GROUP, INC.

 

QUARTERLY REPORT ON FORM 10-Q

September 30, 2020

 

TABLE OF CONTENTS

 

 

 

 

PAGE

 

PART 1 - FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

4

 

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

28

 

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

 

32

 

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

 

32

 

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings.

 

 

33

 

 

 

 

 

 

 

Item 1A.

Risk Factors

 

 

33

 

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

33

 

 

 

 

 

 

 

Item 3.

Default Upon Senior Securities

 

 

33

 

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

 

33

 

 

 

 

 

 

 

Item 5.

Other Information

 

 

33

 

 

 

 

 

 

 

Item 6.

Exhibits

 

 

34

 

 

 

 

 

 

SIGNATURES

 

 

35

 

 

 
2

Table of Contents

   

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

Table of Contents

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

AmpliTech Group, Inc.

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

 

 
4

Table of Contents

 

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,

 

 

 

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

 

 
5

Table of Contents

 

AmpliTech Group, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

For The Nine

 

 

For The Nine

 

 

 

Months Ended

 

 

Months Ended

 

 

 

September 30,

 

 

September 30,

 

Cash Flows from Operating Activities:

 

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

 

 
6

Table of Contents

  

Amplitech Group, Inc.

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

 

 
7

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)

 

(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 the assets of Specialty Microwave Corporation (SMW), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and all intellectual property. The assets also included all eight team members of SMW. (see Note 4).

 

Specialty designs and manufactures passive microwave components and related subsystems that meet individual customer specifications. SMW has both domestic and international customers for use in satellite communication ground networks.

 

 
8

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. Our DOA7 rated orders classifies us as a DHS CISA (“Critical Infrastructure”) company and 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 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.

 

 
9

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.

 

 
10

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.

 

 
11

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.

 

 
12

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) 

 

We do not have significant returns. We do not typically offer extended warranty or service plans.

 

Determine the transaction price. Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. None of our contracts as of September 30, 2020 contained a significant financing component. Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns, rebates, discounts, and other adjustments. The estimates of variable consideration are based on historical payment experience, historical and projected sales data, and current contract terms. Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.

 

Allocate the transaction price to performance obligations in the contract. We typically do not have multiple performance obligations in our contracts with customers. As such, we generally recognize revenue upon transfer of the product to the customer’s control at contractually stated pricing.

 

Recognize revenue when or as we satisfy a performance obligation. We generally satisfy performance obligations at a point in time upon either shipment or delivery of goods, in accordance with the terms of each contract with the customer. We do not have significant service revenue.

 

Reserves are recorded as a reduction in net sales and are not considered material to our condensed consolidated statements of income for the 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.

  

 
13

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

)

  

 
14

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.

  

 
15

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

 

 

 
16

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 Specialty Microwave Corporation(SMW), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and all intellectual property. The assets also included all eight team members of SMW. The total consideration paid was $1,143,633, consisting of $668,633 in cash and a $475,000 promissory note with an interest rate of 6%. 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.

 

 
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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

 

  

 
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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

 

 

 
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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

 

  

 
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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. 

 

 
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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 Specialty Microwave Corporation(SMW), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and all intellectual property. The assets also included all eight team members of SMW. The total consideration paid was $1,143,633, consisting of $668,633 in cash and a $475,000 promissory note with an interest rate of 6%. Beginning November 1, 2019, payment of principal and interest shall be due payable in fifty-nine (59) monthly payments of $9,213 with a final payment due October 1, 2024 of $9,203. As of 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.

 

 
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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 Reliefand Economic Security Act (“CARES Act”) administered by the U.S Small Business Administration (“SBA”). The PPP Loan was disbursed by the PPP Loan Lender on April 20, 2020 (the “Disbursement Date”). The PPP Loan bears an interest at 1.00% per annum and will mature two years from the Disbursement Date. The Company plans to apply for PPP Loan forgiveness. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used by the Company for 2020 payroll costs, mortgage interest payments, rent and utilities.

 

This has helped to offset some of the adverse effects of this pandemic and allowed us to serve our customers at a reduced capacity but without experiencing any cancellation of our open orders. 

 

In addition, on September 12, 2019, the Company was approved for a $250,000 equipment leasing facility. The Company has borrowed against the leasing facility as follows:

 

 

·

On December 20, 2019, the Company borrowed $58,192 to be paid over a three-year term with monthly payments of $ 1,736 at an interest rate of 5.26%. The balance as of 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

 

  

 
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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. 

 

 
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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

 

  

 
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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.

 

 
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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.

 

 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis contain forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.

 

Business Overview

 

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 the assets of Specialty Microwave Corporation(SMW), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and all intellectual property. The assets also included all eight team members of SMW. 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.

 

Specialty designs and manufactures passive microwave components and related subsystems that meet individual customer specifications. SMW has both domestic and international customers for use in satellite communication ground networks.

 

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 has 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. Our DOA7 rated orders classifies us as a DHS CISA (“Critical Infrastructure”) company and we opened 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 this quarter and into next quarter 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.

 

 
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On April 20, 2020, the Company entered into a Paycheck Protection Program Promissory Note (“PPP Note”) in the principal amount of $232,200 (“PPP Loan”) from BNB Bank (“PPP Loan Lender”). The PPP Loan was obtained pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) administered by the U.S Small Business Administration (“SBA”). The PPP Loan was disbursed by the PPP Loan Lender on April 20, 2020 (the “Disbursement Date”). The PPP Loan bears an interest at 1.00% per annum and will mature two years from the Disbursement Date. The Company plans to apply for PPP Loan forgiveness. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used by the Company for 2020 payroll costs, mortgage interest payments, rent and utilities. This has helped to offset some of the adverse effects of this pandemic and allowed us to serve our customers at a reduced capacity but without experiencing any cancellation of our open orders.

 

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 leasing 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%

 

 
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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.

 

For the Three Months Ended September 30, 2020 and September 30, 2019

 

Revenues

 

Sales increased by $441,836 or approximately 62.33%, when comparing sales for the three months ended September 30, 2019 of $708,896 to sales for the three months ended September 30, 2020 of $1,150,732. Overall, Amplitech sales increased by $222,253 in the defense, aerospace and satellite communications markets. The purchase of Specialty Microwave helped increase sales in the telecommunication sector by $219,583 during this time period. Although the COVID-19 pandemic adversely impacted revenue in March of 2020, sales have begun to improve in the third quarter of 2020 as the economy has begun to reopen. However, there is an ongoing risk that the COVID-19 pandemic may again have a material effect on our sales in future periods.

 

Cost of Goods Sold and Gross Profit

 

Cost of goods sold increased by $271,960 or 75.86% for the three months ended September 30, 2020 compared to the three 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 mix becomes more customer specific and diversified, the cost of manufacturing has increased. This resulted in a 48.48% increase in gross profit, or $169,876 when comparing the third quarter of 2020 gross profit of $520,246 to the third quarter of 2019 gross profit of $350,370. Gross profit percentage decreased from 49.42% to 45.21%, a decrease of 4.12% as a result of the product mix.

 

Selling, General and Administrative Expenses

 

General and administrative expenses decreased from $478,297 for the three months ended September 30, 2019 compared to $475,248 for the three months ended September 30, 2020, a decrease of $3,049. For the three months ended September 30, 2020, there was a decrease in parent company expenses. The termination of our director led to a decrease in director’s fees and stock compensation. In addition, expenses relating to the asset acquisition of Specialty Microwave, such as accounting, legal and consulting expenses were incurred during the three months ended September 30, 2019. While parent expenses have decreased, Amplitech Inc. did incur an increase in selling, general and administrative expenses for the three months ended September 30, 2020. The Company hired a new director of sales and marketing associate to promote and expand existing and new product lines. We have also incurred additional equipment leasing 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 net income from operations of $44,998 for the three months ended September 30, 2020 compared to net loss from operations of $127,927 for the three months ended September 30, 2019, primarily due to the expenses incurred for the acquisition of Specialty Microwave.

 

 
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Other Income (Expenses)

 

Interest expense increased from $10,457 for the three months ended September 30, 2019 compared to $27,989 for the three months ended June 30, 2020, an increase of $17,532. 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 Income (Loss)

 

The Company had net income of $17,010 and a net loss of $138,384 for the three months ending September 30, 2020 and 2019, respectively.

 

Liquidity and Capital Resources

 

We have historically financed our operations by the issuance of debt from third party lenders, notes issued to various private individuals and personal funds advanced from time to time by the majority shareholder, who is also the President and Chief Executive Officer of the Company.

 

As of 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 there payment 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.

 

 
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The discussion and analysis of our financial condition and results of operations is based upon our financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of inventory, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes there have been no significant changes during the nine month period ended September 30, 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.

 

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 30,2020, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There were no changes that have affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the period covered by this report. 

 

 
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PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

To the best of our knowledge, there are no pending legal proceedings to which we are a party or of which any of our property is the subject.

 

Item 1A. Risk Factors.

 

Smaller reporting companies are not required to provide the information required by this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable

 

Item 5. Other Information.

 

None.

 

 
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Item 6. Exhibits.

 

(a) Exhibits

 

Exhibit No.

 

Description

31.1

 

Rule 13a-14(a)/ 15d-14(a) Certification of Principal Executive Officer

31.2

 

Rule 13a-14(a)/ 15d-14(a) Certification of Principal Financial Officer

32.1

 

Section 1350 Certification of Principal Executive Officer

32.2

 

Section 1350 Certification of Principal Financial Officer

101. INS

 

XBRL Instance Document

101. SCH

 

XBRL Taxonomy Extension Schema Document

101. CAL

 

XBRL Taxonomy Extension Calculation Link base Document

101. DEF

 

XBRL Taxonomy Extension Definition Link base Document

101. LAB

 

XBRL Taxonomy Extension Label Link base Document

101. PRE

 

XBRL Taxonomy Extension Presentation Link base Document

  

 
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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

AmpliTech Group, Inc.

 

 

 

 

 

Dated: November 16, 2020

By:

/s/ Fawad Maqbool

 

 

 

Fawad Maqbool

 

 

 

President and Chief Executive Officer

(Principal Executive Officer)

 

 

Dated: November 16, 2020

By:

/s/ Louisa Sanfratello

 

 

 

Louisa Sanfratello

Chief Financial Officer

(Principal Financial Officer)

 

 
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