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AmpliTech Group, Inc. - Quarter Report: 2017 March (Form 10-Q)

ampg_10q.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2017

 

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)

 

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 x 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 x No ¨ 

 

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 (Check one):

 

Large accelerated filer

o

Accelerated filer

o

Non-accelerated filer

o

Smaller reporting company

x

(Do not check if a smaller reporting company)

Emerging growth company

x

 

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 x

 

As of May 8, 2017, the registrant had 46,136,326 shares of common stock, par value $0.001 per share, issued and outstanding. 

 

 
 
 
 

AMPLITECH GROUP, INC.

 

QUARTERLY REPORT ON FORM 10-Q

March 31, 2017

TABLE OF CONTENTS

 

 

PAGE

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

4

 

Item 2.

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

16

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

19

 

Item 4.

Controls and Procedures

19

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings.

20

 

Item 1A.

Risk Factors

20

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

20

 

Item 3.

Default Upon Senior Securities

20

 

Item 4.

Mine Safety Disclosures

20

 

Item 5.

Other Information

20

 

Item 6.

Exhibits

21

 

SIGNATURES

22

 

 
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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 of 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. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements concerning other matters addressed in this Quarterly Report on Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Quarterly Report on Form 10-Q.

 

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

 

 
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PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

AmpliTech Group, Inc.

Consolidated Balance Sheets

 

 

 

March 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

(Unaudited)

 

 

(Revised)

 

Assets

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$ 250,239

 

 

$ 283,660

 

Accounts receivable

 

 

167,762

 

 

$ 146,235

 

Inventory, net

 

 

290,023

 

 

$ 266,938

 

Prepaid expenses

 

 

18,041

 

 

$ 3,705

 

Total Current Assets

 

 

726,065

 

 

 

700,538

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

69,079

 

 

 

73,290

 

Security deposits

 

 

8,753

 

 

$ 8,753

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$ 803,897

 

 

$ 782,581

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts Payable and accrued expenses

 

 

107,355

 

 

 

92,833

 

Customer deposits

 

 

-

 

 

 

22,430

 

Notes payable

 

 

15,000

 

 

 

15,000

 

Line of credit

 

 

50,467

 

 

 

54,907

 

Total Current Liabilities

 

 

172,822

 

 

 

185,170

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

172,822

 

 

 

185,170

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

Series A convertible preferred stock, par value $.001, 401,000 shares authorized, 1,000 shares issued and outstanding, respectively

 

 

1

 

 

 

1

 

Series B convertible preferred stock, par value $.001, 75,000 shares authorized, 0 shares issued and outstanding, respectively

 

 

-

 

 

 

-

 

Common Stock, par value $.001, 500,000,000 shares authorized, 46,136,326 shares issued and outstanding, respectively

 

 

46,136

 

 

 

46,136

 

Additional paid-in capital

 

 

1,631,976

 

 

 

1,631,976

 

Accumulated deficit

 

 

(1,047,038 )

 

 

(1,080,702 )

 

 

 

 

 

 

 

 

 

Total Stockholders' Equity

 

 

631,075

 

 

 

597,411

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Equity

 

$ 803,897

 

 

$ 782,581

 

 

See accompanying notes to the consolidated financial statements

 

 
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AmpliTech Group, Inc.

Consolidated Statements of Operations

For The Three Months Ended March 31, 2017 and 2016

(Unaudited)

 

 

For The Three Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Revenue

 

$ 458,600

 

 

$ 146,480

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

197,111

 

 

 

107,996

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

261,489

 

 

 

38,484

 

 

 

 

 

 

 

 

 

 

General and administrative expense

 

 

225,493

 

 

 

176,065

 

 

 

 

 

 

 

 

 

 

Income (Loss) From Operations

 

 

35,996

 

 

 

(137,581 )

 

 

 

 

 

 

 

 

 

Other Income (Expense)

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(2,332 )

 

 

(3,638 )

 

 

 

 

 

 

 

 

 

Income (Loss) Before Income Taxes

 

 

33,664

 

 

 

(141,219 )

 

 

 

 

 

 

 

 

 

Provision For Income Taxes

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

 

33,664

 

 

 

(141,219 )

 

 

 

 

 

 

 

 

 

Net Income (Loss) Per Share;

 

 

 

 

 

 

 

 

Basic

 

$ 0.01

 

 

 

(0.00 )

Diluted

 

$ 0.00

 

 

 

(0.00 )

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding;

 

 

 

 

 

 

 

 

Basic

 

 

46,136,326

 

 

 

46,136,326

 

Diluted

 

 

86,030,685

 

 

 

46,136,326

 

 

See accompanying notes to the consolidated financial statements

 

 
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AmpliTech Group, Inc.

Consolidated Statements of Cash Flows

For The Three Months Ended March 31, 2017 and 2016

(Unaudited)

 

 

 

March 31,

 

 

March 31,

 

 

 

2017

 

 

2016

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

$ 33,664

 

 

$ (141,219 )

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

6,633

 

 

 

7,215

 

Changes in Operating Assets and Liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(21,527 )

 

 

145,993

 

Inventory

 

 

(23,085 )

 

 

(84,890 )

Prepaid expenses

 

 

(14,336 )

 

 

3,317

 

Security deposits

 

 

-

 

 

 

(320 )

Accounts payable and accrued expenses

 

 

14,522

 

 

 

7,094

 

Customer deposits

 

 

(22,430 )

 

 

211,060

 

 

 

 

 

 

 

 

 

 

Total Adjustments

 

 

(60,223 )

 

 

289,469

 

 

 

 

 

 

 

 

 

 

Net cash (used in) provided by operating activities

 

 

(26,559 )

 

 

148,250

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Purchase of equipment

 

 

(2,422 )

 

 

(14,335 )

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

(2,422 )

 

 

(14,335 )

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Advances from/(repayment to) line of credit, net

 

 

(4,440 )

 

 

(4,920 )

Repayment of amounts due to officer

 

 

-

 

 

 

(50,888 )

 

 

 

 

 

 

 

 

 

Net cash used in financing activities

 

 

(4,440 )

 

 

(55,808 )

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

(33,421 )

 

 

78,108

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, Beginning of Period

 

 

283,660

 

 

 

49,035

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, End of Period

 

$ 250,239

 

 

$ 127,143

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for interest expense

 

$ 2,370

 

 

$ 2,577

 

Cash paid for income taxes

 

$ -

 

 

$ -

 

 

See accompanying notes to the consolidated financial statements

 

 
6
 
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AmpliTech Group, Inc.

Notes To Consolidated Financial Statements

For The Three Months Ended March 31, 2017 and 2016 (Unaudited)

 

(1) Organization and Business Description

 

AmpliTechGroup Inc. (“AmpliTech” or “the Company”) was incorporated under the laws of the State of New York on October 18, 2002. On August 13, 2012, the Company acquired AmpliTech Inc., by issuing 16,675,000 shares of the Company’s Common Stock to the shareholders of Amplitech Inc. in exchange for 100% of the outstanding shares of AmpliTech Inc. (“the Share Exchange”). After the Share Exchange, the selling shareholders owned 1,200,000 shares of the outstanding 17,785,000 shares of Company common stock, resulting in a change in control. Accordingly, the transaction was accounted for as a reverse acquisition in which AmpliTech, Inc. was deemed to be the accounting acquirer, and the operations of the Company were consolidated for accounting purposes. The capital balances have been retroactively adjusted to reflect the reverse acquisition.

 

AmpliTech designs, engineers and assembles micro-wave component based low noise amplifiers (“LNA”) that meet individual customer specifications. Application of the Company’s proprietary technology results in maximum frequency gain with minimal background noise distortion as required by each customer. The Company has both domestic and international customers in such industries as aerospace, governmental, defense and commercial satellite.

 

(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 considered necessary for a fair presentation have been included.

 

The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017. 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, 2016 and 2015 included in Form 10-K filed with the SEC.

 

 
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AmpliTech Group, Inc.

Notes To Consolidated Financial Statements

For The Three Months Ended March 31, 2017 and 2016 (Unaudited)

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.

 

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 March 31, 2017 the Company’s cash and cash equivalents were deposited primarily in one financial institution.

 

Allowance for Doubtful Accounts

 

The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience and a review of the current status of accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change in the future. An allowance of $0 has been recorded at March 31, 2017.

 

Depreciation and Amortization

 

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.

 

Income Taxes

 

The Company accounts for income taxes under the provisions of Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740 “Income Tax”. ASC 740 requires the recognition of 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 Company has adopted the provisions of FASB ASC 740-10-05 “Accounting for Uncertainty in Income Taxes”. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. 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 March 31, 2017, the Company had no material unrecognized tax benefits.

 

 
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AmpliTech Group, Inc

Notes To Consolidated Financial Statements

For The Three Months Ended March 31, 2017 and 2016 (Unaudited)

 

Earnings Per Share

 

Basic earnings (loss) per share (“EPS”) are determined by dividing the net earnings (loss) by the weighted-average number of shares of common shares outstanding during the period. Diluted EPS is determined by dividing net earnings (loss) 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 March 31, 2017 and 2016 there were 86,030,685 and 39,607,619, respectively potential dilutive shares that needed to be considered as common share equivalents.

 

Inventory Obsolescence

 

Inventory quantities and related values are analyzed at the end of each fiscal quarter to determine those items that are slow moving or 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.

 

Revenue Recognition

 

Revenues and costs of revenues are recognized during the period in which the products are shipped. The Company applies the provisions of FASB Accounting Standards Codification (“ASC”) 605-10, Revenue Recognition in Financial Statements ASC 605-10, which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements filed with the SEC. ASC 605-10 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. In general, the Company recognizes revenue for sale of products when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is fixed or determinable, and (iv) the collectability is reasonably assured.

 

The Company’s sources of revenue are from the sale of various component amplifiers. Revenue is recognized upon shipment of such products. The Company offers a 100% satisfaction guarantee against defects for 90 days after the sale of their product except for a few circumstances. There are no maintenance or service contracts related to any product sale.

 

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.

 

 
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AmpliTech Group, Inc

Notes To Consolidated Financial Statements

For The Three Months Ended March 31, 2017 and 2016 (Unaudited)

 

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 March 31, 2017.

 

Recent Accounting Pronouncements

 

Management does not believe that any recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying consolidated financial statements.

 

Fair Value of Assets and Liabilities 

 

The Company complies with the provisions of ASC 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 relates to financial assets and financial liabilities. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (GAAP), and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions.

 

ASC 820-10 defines fair value 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. ASC 820-10 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions, about market participant assumptions, that are developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820-10 are described below:

 

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.

 

 
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AmpliTech Group, Inc

Notes To Consolidated Financial Statements

For The Three Months Ended March 31, 2017 and 2016 (Unaudited)

 

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.

 

Application of Valuation Hierarchy

 

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. As such, the Company assessed that the fair value of , accounts receivable, prepaid expenses, accounts payable and accrued expenses, customer deposits, notes payable, and amounts due to officer approximate their carrying values due to their short-term nature.

 

(3) Inventory

 

Inventory, which consists primarily of raw materials and finished goods, is stated at the lower of cost (first-in, first-out basis) or market (net realizable value). The inventory value at March 31, 2017 and December 31, 2016 was as follows:

 

 

 

March 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Raw Materials

 

$ 213,212

 

 

$ 189,373

 

Work-in Progress

 

 

30,280

 

 

 

48,791

 

Finished Goods

 

 

107,805

 

 

 

90,048

 

Engineering Models

 

 

3,726

 

 

 

3,726

 

 

 

 

 

 

 

 

 

 

Subtotal

 

$ 355,023

 

 

$ 331,938

 

Less: Reserve for Obsolescence

 

 

(65,000 )

 

 

(65,000 )

 

 

 

 

 

 

 

 

 

Total

 

$ 290,023

 

 

$ 266,938

 

 

 
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AmpliTech Group, Inc

Notes To Consolidated Financial Statements

For The Three Months Ended March 31, 2017 and 2016 (Unaudited)

 

(4) Property and Equipment

 

Property and Equipment with estimated useful lives of seven and ten years consisted of the following at March 31, 2017 and December 31, 2016:

 

 

 

 

March 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Lab Equipment

 

$ 560,833

 

 

$ 560,833

 

Furniture and Fixtures

 

 

13,990

 

 

 

11,568

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

574,823

 

 

 

572,401

 

Less: Accumulated Depreciation

 

 

(505,744 )

 

 

(499,111 )

 

 

 

 

 

 

 

 

 

Total

 

$ 69,079

 

 

$ 73,290

 

  

Depreciation expense for the months ended March 31, 2017 was $6,633.

 

(5) Notes Payable

 

Notes Payable at March 31, 2017 includes a demand note totaling $15,000 from one corporation with an interest rate of 8% per annum. Accrued interest related to this note was $10,185 as of March 31, 2017 and interest expense related to this note for the three months ended March 31, 2017 was $296.

 

(6) Line of Credit

 

On November 16, 2015, the Company entered into a commercial line of credit for $150,000. This agreement will be paid over a three year term with monthly payments equal to 2.780% of the outstanding balance plus accrued interest. The initial variable interest rate on this agreement is 5.25% per annum. This interest rate may change every year on the anniversary date or change date to reflect the new prime rate in effect as per the Wall Street Journal plus 2%. The interest rate will never be greater than 25% or less than 5%. On April 20, 2016, the existing line of credit was increased from $150,000 to $250,000 with an extended maturity date of April 20, 2019. The outstanding balance as March 31, 2017 was $50,467 and the interest paid for the three months ended March 31, 2017 was $758.

 

 
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AmpliTech Group, Inc

Notes To Consolidated Financial Statements

For The Three Months Ended March 31, 2017 and 2016 (Unaudited)

 

(7) Capital Stock

 

Preferred Stock:

 

On July 10, 2013, the board of directors of the company approved a certificate of amendment to the articles of incorporation and changed the authorized capital stock of the Company to include and authorize 500,000 shares of Preferred Stock, par value $0.001 per share.

 

In July 2013, the Board of Directors of the Company designated 140,000 shares of Preferred Stock as Series A Convertible Preferred Stock (or “Series A”). Furthermore, each share of Series A is convertible into 100 shares of common stock at any time after issuance and the holder of each share of Series A is entitled to 100 votes when the vote of holders of the Company’s common stock is sought. In January 2015, the Board of Directors of the Company increased the number of Series A designated from 140,000 to 401,000. There are currently 1,000 shares of Series A outstanding.

 

In April 2015, the Board of Directors of the Company designated 75,000 shares of Preferred Stock as Series B Convertible Preferred Stock (or “Series B”). The Series B shares are convertible into common stock at a conversion rate of one Series B share for 289 common shares. In addition, a holder of Series B Preferred Stock shall not be entitled to have any voting rights and shall hold a liquidation preference junior to a holder of Series A shares and pari passu with common shareholders. There are currently no shares of Series B outstanding.

 

Common Stock:

 

The Company originally authorized 50,000,000 shares of common stock with a par value of $0.001. Effective May 20, 2014, the Company increased its authorized shares of common stock from 50,000,000 to 500,000,000. As of March 31, 2017 and December 31, 2016 the Company had 46,136,326 shares of common stock issued and outstanding, respectively.

 

Options:

 

During 2014, the Company granted the chief executive officer and sole director 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 of the underlying common stock. There is no expiration date for this option.

 

 
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AmpliTech Group, Inc

Notes To Consolidated Financial Statements

For The Three Months Ended March 31, 2017 and 2016 (Unaudited)

 

(8) Commitments and Contingencies:

 

On December 4, 2015, the Company entered into a new operating lease agreement to rent office space. This five year agreement commences February 1, 2016 with an annual rent of $50,000 and 3.75% increases in each successive lease year.

 

Rent expense for the three months ended March 31, 2017 was $12,813.

 

(9) Revision of Prior Year Financial Statements:

 

The Company’s correction of the tax provision for the year ended December 31, 2016, resulted in an increase of net income by $41,092.

 

In accordance with the guidance provided by the SEC’s Staff Accounting Bulletin 99, Materiality and Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements the Company has determined that the impact of adjustments relating to the correction of this accounting error are not material to previously issued annual audited consolidated financial statements. Accordingly, these changes are disclosed herein and will be disclosed prospectively.

 

As a result of the aforementioned correction of accounting errors, the relevant annual financial statements have been restated as follows:

 

Effects on financials for the year ended December 31, 2016:

 

 

 

December 31, 2016

 

 

 

 As Previously

 

 

 

 

 

 

 

Reported

 

 

Adjustment

 

 

As Restated

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

 

Accounts Payable and accrued expenses

 

$ 133,925

 

 

$ (41,092 )

 

$ 92,833

 

Total Current Liabilities

 

 

226,262

 

 

 

(41,092 )

 

 

185,170

 

Total Liabilities

 

$ 226,262

 

 

$ (41,092 )

 

$ 185,170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Total Stockholders’ Equity

 

 

556,319

 

 

 

41,092

 

 

 

594,411

 

Total Liabilities and Stockholders’ Equity

 

$ 782,581

 

 

$ 41,092

 

 

$ 782,581

 

 

 
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 AmpliTech Group, Inc

Notes To Consolidated Financial Statements

For The Three Months Ended March 31, 2017 and 2016 (Unaudited)

 

 

 

For the year ended December 31, 2016

 

 

 

 As Previously

 

 

 

 

 

 

 

 Reported

 

 

 Adjustments

 

 

 As Restated

 

 

 

 

 

 

 

 

 

 

 

Statement of Operations

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

$ 41,092

 

 

$ (41,092 )

 

$ -

 

Net income

 

 

415,196

 

 

 

41,092

 

 

 

456,288

 

 

 

 

 For the year ended December 31, 2016

 

 

 

 As Previously

 

 

 

 

 

 

 

 Reported 

 

 

 Adjustments

 

 

 As Restated

 

Statement of Cash Flows

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

Net Income

 

$ 415,196

 

 

$ 41,092

 

 

$ 456,288

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

40,250

 

 

 

(41,092 )

 

 

842

 

Total adjustments

 

 

(68,533 )

 

 

(41,092 )

 

 

(109,625 )

 

(10) Subsequent events

 

In accordance with ASC 855-10, Company management reviewed all material events through the date of this report. There are no material subsequent events to report.

 

 
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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 contains 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, 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.

 

Emerging Growth Company Status

 

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation.

 

Under the JOBS Act, we will remain an “emerging growth company” until the earliest of:

 

 

· the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more;

 

 

 

 

· the last day of the fiscal year following the fifth anniversary of the completion of this offering;

 

 

 

 

· the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; and

 

 

 

 

· the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, or the Exchange Act. We will qualify as a large accelerated filer as of the first day of the first fiscal year after we have (i) more than $700 million in outstanding common equity held by our non-affiliates and (ii) been public for at least 12 months. The value of our outstanding common equity will be measured each year on the last day of our second fiscal quarter.

 

The Section 107 of the JOBS Act provides that we may elect to utilize the extended transition period for complying with new or revised accounting standards and such election is irrevocable if made. As such, we have made the election to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act.

 

 
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Results of Operations

 

For The Three Months Ended March 31, 2017 and March 31, 2016

 

Revenues

 

Sales increased by $312,120 or approximately 213%, when comparing sales for the three months ended March 31, 2017 of $458,600 to sales for the three months ended March 31, 2016 of $146,480. During the first quarter of 2016, the Company experienced a manufacturing shut down as it relocated to a larger facility and equipment damage and repair delays hindered production.

 

Cost of Goods Sold and Gross Profit

 

Cost of goods sold as a percentage of sales increased by $89,115 or 83% for the three months ended March 31, 2017 compared to the three months ended March 31, 2016. This resulted in a corresponding 579% increase in gross profit as a percentage of sales, or $223,005, when comparing the first three months of 2017 gross profit of $261,489, to the first three months of 2016 gross profit of $38,484. The increase in gross profit is a direct result of the increase in sales and outsourcing all orders with significant quantities.

 

General and Administrative Expenses

 

General and administrative expenses increased from $176,065 for the first three months of 2016 compared to $225,493 for the first three months of 2017, an increase of $49,428 or approximately 28%. This increase was due to expanded marketing expenditures in an effort to increase product line exposure and client base and research and development projects.

 

Income (Loss) From Operations

 

As a result of the above, the Company had a net income from operations of $35,996 for the three months ended March 31, 2017 compared to the net loss from operations of $137,581 for the three months ended March 31, 2016, an overall increase of $173,577.

 

Other Income (Expenses)

 

Interest expense decreased from $3,638 for the first three months of 2016 compared to $2,332 for the first three months of 2017, a decrease of $1,306 or approximately 36%. The decrease was primarily due to the low balance on the Company’s line of credit.

 

 
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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 March 31, 2017, we had $250,239 in cash and cash equivalents compared to $283,660 in cash and cash equivalents as of December 31, 2016. As of December 31, 2016 and March 31, 2017 we had a working capital surplus of $515,368 and $553,243, respectively. We had a stockholders’ equity of $597,411 and $631,075 at December 31, 2016 and March 31, 2017, respectively.

 

Net cash used in operating activities was $26,559 for the three months ended March 31, 2017, resulting primarily from the increase in inventory and prepaid expenses. Net cash used in investing activities for the three months ended March 31, 2017 was $2,422 to purchase office equipment. Net cash used in financing activities for the three months ended March 31, 2017 was $4,440 which resulted from the repayment of the Company’s line of credit.

 

We intend 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 from operations and cash on hand will provide sufficient working capital to fund our operations for the next twelve months.

 

Critical Accounting Policies, Estimates and Assumptions

 

The SEC defines critical accounting policies as those that are, in management’s view, most important to the portrayal of our financial condition and results of operations and those that require significant judgments and estimates.

 

The discussion and analysis of our financial condition and results of operations is based upon our financial statements 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 three month period ended March 31, 2017, 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, 2016.

 

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.

 

 
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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 March 31, 2017, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were 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 Linkbase Document

101. DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

101. LAB

 

XBRL Taxonomy Extension Label Linkbase Document

101. PRE

 

XBRL Taxonomy Extension Presentation Linkbase 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.

 

Date: May 9, 2017

By:

/s/ Fawad Maqbool

 

Fawad Maqbool

 

President and Chief Executive Officer

(Principal Executive Officer) 

 

Date: May 9, 2017

By:

/s/ Louisa Sanfratello

 

Louisa Sanfratello

Chief Financial Officer

(Principal Financial Officer) 

 

 

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