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AmpliTech Group, Inc. - Quarter Report: 2019 June (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 June 30, 2019

 

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

N/A

 

N/A 

 

N/A 

 

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 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 (Check one):

 

Large accelerated filer

o

Accelerated filer

o

Non-accelerated filer

x

Smaller reporting company

x

 

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 x

 

As of July 12, 2019, the registrant had 48,336,326 shares of common stock, par value $0.001 per share, issued and outstanding.

 

 
 
 
 

 

AMPLITECH GROUP, INC.

 

QUARTERLY REPORT ON FORM 10-Q

June 30, 2019

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

 

 

23

 

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

 

25

 

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

 

25

 

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings.

 

 

26

 

 

 

 

 

 

 

Item 1A.

Risk Factors

 

 

26

 

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

26

 

 

 

 

 

 

 

Item 3.

Default Upon Senior Securities

 

 

26

 

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

 

26

 

 

 

 

 

 

 

Item 5.

Other Information

 

 

26

 

 

 

 

 

 

 

Item 6.

Exhibits

 

 

27

 

 

 

 

 

 

SIGNATURES

 

 

28

 

 

 
2
 
 

  

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

 

We cannot predict all the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved, and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Quarterly Report on Form 10-Q and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

 

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Considering these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements concerning other matters addressed in this Quarterly Report on Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Quarterly Report on Form 10-Q.

 

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

 

 
3
 
Table of Contents

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

AmpliTech Group, Inc.

Condensed Consolidated Balance Sheets

  

 

 

June 30,

2019

 

 

December 31,

2018

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

710,067

 

 

$

442,098

 

Accounts receivable

 

 

366,853

 

 

 

262,002

 

Inventory, net

 

 

369,539

 

 

 

391,188

 

Prepaid expenses

 

 

109,809

 

 

 

120,100

 

Total Current Assets

 

 

1,556,268

 

 

 

1,215,388

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

155,501

 

 

 

180,745

 

Right of use assets

 

 

86,293

 

 

 

-

 

Security deposits

 

 

11,707

 

 

 

11,707

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$1,809,769

 

 

$1,407,840

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

70,303

 

 

$

86,125

 

Customer deposits

 

 

116,060

 

 

 

190,400

 

Current portion of financing lease

 

 

29,891

 

 

 

29,180

 

Current portion of operating lease

 

 

54,153

 

 

 

-

 

Current portion of loan payable, net of discount

 

 

57,340

 

 

 

-

 

Line of credit

 

 

-

 

 

 

72,897

 

Total Current Liabilities

 

 

327,747

 

 

 

378,602

 

 

 

 

 

 

 

 

 

 

Long Term Liabilities

 

 

 

 

 

 

 

 

Finance lease, net of current portion

 

 

98,807

 

 

 

113,933

 

Operating lease, net of current portion

 

 

34,697

 

 

 

-

 

Loan payable, net of debt discount and current portion

 

 

256,224

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

717,475

 

 

 

492,535

 

 

 

 

 

 

 

 

 

 

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,

 

 

 

 

 

 

 

 

48,336,326 shares

 

 

 

 

 

 

 

 

issued and outstanding, respectively

 

 

48,336

 

 

 

48,336

 

Additional paid-in capital

 

 

1,765,496

 

 

 

1,715,726

 

Accumulated deficit

 

 

(721,539)

 

 

(848,758)

 

 

 

 

 

 

 

 

 

Total Stockholders' Equity

 

 

1,092,294

 

 

 

915,305

 

 

 

 

 

 

 

 

 

 

Total Liabilities and

 

 

 

 

 

 

 

 

Stockholders' Equity

 

$1,809,769

 

 

$1,407,840

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the condensed consolidated financial statements

  
 
4
 
Table of Contents

 

AmpliTech Group, Inc.

Condensed Consolidated Statements of Net Income

(Unaudited)

 

 

 

For The Three Months Ended

 

 

For The Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$631,208

 

 

$618,787

 

 

$1,309,526

 

 

$1,047,328

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

270,442

 

 

 

254,177

 

 

 

624,642

 

 

 

427,830

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

360,766

 

 

 

364,610

 

 

 

684,884

 

 

 

619,498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expense

 

 

301,681

 

 

 

290,610

 

 

 

543,151

 

 

 

501,280

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income From Operations

 

 

59,085

 

 

 

74,000

 

 

 

141,733

 

 

 

118,218

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(10,669)

 

 

(2,545)

 

 

(14,514)

 

 

(3,993)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Before Income Taxes

 

 

48,416

 

 

 

71,455

 

 

 

127,219

 

 

 

114,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision For Income Taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

 

48,416

 

 

 

71,455

 

 

 

127,219

 

 

 

114,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income Per Share;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$0.00

 

 

$0.00

 

 

$0.00

 

 

$0.00

 

Diluted

 

$0.00

 

 

$0.00

 

 

$0.00

 

 

$0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

48,336,326

 

 

 

48,000,062

 

 

 

48,336,326

 

 

 

47,197,652

 

Diluted

 

 

89,368,923

 

 

 

87,791,455

 

 

 

89,368,923

 

 

 

86,989,044

 

 

See accompanying notes to the condensed consolidated financial statements

 

 
5
 
Table of Contents

 

Amplitech Group, Inc.

Condensed Consolidated Statements of Stockholders' Equity

For The Three Months and Six Months Ended June 30, 2019 and 2018

 

 

 

 

 

 

 

For the Three Months ending June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Convertible Preferred

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Total

 

 

 

Number of

Shares

 

 

Par

Value

 

 

Number of

Shares

 

 

Par

Value

 

 

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Stockholders'

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2019

 

 

1,000

 

 

$1

 

 

 

48,336,326

 

 

$48,336

 

 

$1,715,726

 

 

$(769,955)

 

$994,108

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income for the three months ended June 30, 2019

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

48,416

 

 

 

48,416

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

49,770

 

 

 

-

 

 

 

49,770

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2019

 

 

1,000

 

 

$1

 

 

 

48,336,326

 

 

$48,336

 

 

$1,765,496

 

 

$(721,539)

 

$1,092,294

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months ending June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Convertible Preferred

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Number of

 

 

Par

 

 

Number of

 

 

Par

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2018

 

 

1,000

 

 

$1

 

 

 

46,636,326

 

 

$46,636

 

 

$1,647,726

 

 

$(1,134,981)

 

$559,382

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income for the three months ended June 30, 2018

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

71,455

 

 

 

71,455

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for prepaid consulting

 

 

-

 

 

 

-

 

 

 

1,700,000

 

 

 

1,700

 

 

 

66,300

 

 

 

-

 

 

 

68,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2018

 

 

1,000

 

 

$1

 

 

 

48,336,326

 

 

$48,336

 

 

$1,714,026

 

 

$(1,063,526)

 

$698,837

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months ending June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Convertible Preferred

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Number of

 

 

Par

 

 

Number of

 

 

Par

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2018

 

 

1,000

 

 

$1

 

 

 

48,336,326

 

 

$48,336

 

 

$1,715,726

 

 

$(848,758)

 

$915,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income for the six months ended June 30, 2019

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

127,219

 

 

 

127,219

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

49,770

 

 

 

-

 

 

 

49,770

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2019

 

 

1,000

 

 

$1

 

 

 

48,336,326

 

 

$48,336

 

 

$1,765,496

 

 

$(721,539)

 

$1,092,294

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months ending June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Convertible Preferred

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Number of

 

 

Par

 

 

Number of

 

 

Par

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2017

 

 

1,000

 

 

$1

 

 

 

46,136,326

 

 

$46,136

 

 

$1,631,976

 

 

$(1,177,751)

 

$500,362

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for prepaid consulting

 

 

-

 

 

 

-

 

 

 

2,200,000

 

 

 

2,200

 

 

 

82,050

 

 

 

-

 

 

 

84,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income for the six months ended June 30, 2018

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

114,225

 

 

 

114,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2018

 

 

1,000

 

 

$1

 

 

 

48,336,326

 

 

$48,336

 

 

$1,714,026

 

 

$(1,063,526)

 

$698,837

 

 

See accompanying notes to the condensed consolidated financial statements

 

 
6
 
Table of Contents

 

AmpliTech Group, Inc.

Condensed Consolidated Statements of Cash Flows

For The Six Months Ended June 30, 2019 and 2018

(Unaudited)

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$127,219

 

 

$114,225

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

25,244

 

 

 

13,750

 

Amortization of prepaid consulting

 

 

21,338

 

 

 

15,462

 

Amortization of debt discount

 

 

1,427

 

 

 

-

 

Amortization of right-of-use asset

 

 

27,253

 

 

 

-

 

Stock based compensation

 

 

49,770

 

 

 

 

 

Changes in Operating Assets and Liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(104,851)

 

 

(228,395)

Inventory

 

 

21,649

 

 

 

(122,534)

Prepaid expenses

 

 

(11,047)

 

 

312

 

Accounts payable and accrued expenses

 

 

(15,822)

 

 

94,309

 

Operating lease liability

 

 

(24,696)

 

 

-

 

Customer deposits

 

 

(74,340)

 

 

89,398

 

 

 

 

 

 

 

 

 

 

Total Adjustments

 

 

(84,075)

 

 

(137,698)

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

 

43,144

 

 

 

(23,473)

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Purchase of equipment

 

 

-

 

 

 

(2,133)

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

-

 

 

 

(2,133)

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

(Repayment)Advances from line of credit, net

 

 

(72,897)

 

 

38,790

 

Payments of capital lease financing

 

 

(14,415)

 

 

-

 

Proceeds from loan payable, net

 

 

312,137

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

224,825

 

 

 

38,790

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

267,969

 

 

 

13,184

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, Beginning of Period

 

 

442,098

 

 

 

117,990

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, End of Period

 

$710,067

 

 

$131,174

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for interest expense

 

$13,564

 

 

$4,000

 

Cash paid for income taxes

 

$50

 

 

$-

 

 

 

 

 

 

 

 

 

 

Non-Cash Financing Activities

 

 

 

 

 

 

 

 

Shares issued for prepaid consulting

 

$-

 

 

$84,250

 

Original issuance discount

 

$24,465

 

 

$-

 

Right of use operating lease asset obtained

 

 

 

 

 

 

 

 

in exchange for operating lease liabilities

 

$113,546

 

 

$-

 

 

See accompanying notes to the condensed consolidated financial statements

 

 
7
 
Table of Contents

 

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2019 and 2018 (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 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 six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019. 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, 2018 and 2017 included in Form 10-K filed with the SEC.

 

 
8
 
Table of Contents

 

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2019 and 2018 (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.

 

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 June 30, 2019, the Company’s cash and cash equivalents were deposited primarily in one financial institution.

 

Receivables

 

Trade accounts receivable are recorded at the net invoice value and are not interest bearing.

 

The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience and a review of the current status of accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change in the future. An allowance of $0 has been recorded at June 30, 2019 and December 31, 2018.

 

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).

 

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.

 

 
9
 
Table of Contents

 

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2019 and 2018 (Unaudited)

 

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.

 

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.

 

Leases

 

During the first quarter of 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.

 

 
10
 
Table of Contents

 

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2019 and 2018 (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 June 30, 2019 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 six months ended June 30, 2019.

 

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 six months ended June 30, 2019 and 2018 were $27,376 and $20,425.

 

 
11
 
Table of Contents

 

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2019 and 2018 (Unaudited)

 

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 June 30, 2019, the Company had no material unrecognized tax benefits.

 

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.

 

 

 

Net Income

 

 

Shares

 

 

Per Share

Amount

 

 

 

 

 

 

 

 

 

 

 

For the three months ended June 30, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

$48,416

 

 

 

48,336,326

 

 

$0.00

 

Effect of dilutive stock options, warrants and series A shares

 

 

 

 

 

 

41,032,597

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

$48,416

 

 

 

89,368,923

 

 

$0.00

 

For the three months ended June 30, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

$71,455

 

 

 

48,000,062

 

 

$0.00

 

Effect of dilutive stock options and series A shares

 

 

 

 

 

 

39,791,393

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

$71,455

 

 

 

87,791,455

 

 

$0.00

 

  
 
12
 
Table of Contents

 

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2019 and 2018 (Unaudited)

 

 

 

Net Income

 

 

Shares

 

 

Per Share

Amount

 

 

 

 

 

 

 

 

 

 

 

For the six months ended June 30, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

$127,219

 

 

 

48,336,326

 

 

$0.00

 

Effect of dilutive stock options, warrants and series A shares

 

 

 

 

 

 

41,032,597

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

$127,219

 

 

 

89,368,923

 

 

$0.00

 

For the six months ended June 30, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

$114,225

 

 

 

47,197,652

 

 

$0.00

 

Effect of dilutive stock options and series A shares

 

 

 

 

 

 

39,791,392

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

$114,225

 

 

 

86,989,044

 

 

$0.00

 

 

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.

 

 
13
 
Table of Contents

 

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

 For The Six Months Ended June 30, 2019 and 2018 (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.

 

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 June 30, 2019.

 

Recent Accounting Pronouncements

 

During the first quarter of 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.

 

 
14
 
Table of Contents

 

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2019 and 2018 (Unaudited)

 

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard became effective for us on January 1, 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.

 

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 for the six months ended:

 

 

 

For the three months ended

 

 

For the six months ended:

 

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic sales

 

$495,525

 

 

$566,650

 

 

$777,875

 

 

$988,410

 

International sales

 

 

135,683

 

 

 

52,137

 

 

 

531,651

 

 

 

58,918

 

Total sales

 

$631,208

 

 

$618,787

 

 

$1,309,526

 

 

$1,047,328

 

 

(4) 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 June 30, 2019 and December 31, 2018 was as follows:

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

Raw Materials

 

$274,657

 

 

$279,437

 

Work-in Progress

 

 

62,568

 

 

 

69,480

 

Finished Goods

 

 

113,588

 

 

 

118,545

 

Engineering Models

 

 

3,726

 

 

 

3,726

 

 

 

 

 

 

 

 

 

 

Subtotal

 

$454,539

 

 

$471,188

 

Less: Reserve for

 

 

 

 

 

 

 

 

Obsolescence

 

 

(85,000)

 

 

(80,000)

 

 

 

 

 

 

 

 

 

Total

 

$369,539

 

 

$391,188

 

 

 
15
 
Table of Contents

 

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2019 and 2018 (Unaudited)

 

(5) Property and Equipment

 

Property and Equipment with estimated useful lives of seven and ten years consisted of the following at June 30, 2019 and December 31, 2018:

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

  

 

 

 

 

Lab Equipment

 

$725,348

 

 

$725,348

 

Furniture and Fixtures

 

 

20,192

 

 

 

20,192

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

745,540

 

 

 

745,540

 

Less: Accumulated Depreciation

 

 

(590,039)

 

 

(564,795)

 

 

 

 

 

 

 

 

 

Total

 

$155,501

 

 

$180,745

 

 

Depreciation expense for the six months ended June 30, 2019 and 2018 were $25,244 and $13,750 respectively.

 

(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 of June 30, 2019 and December 31, 2018 was $0 and $72,897, respectively. The Company repaid the line of credit $72,811 during the six months ended June 30, 2019. Interest expense relating to this line of credit for the six months ended June 30, 2019 and 2018 was $1,386 and $4,000, respectively.

 

(7) 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.

 

 
16
 
Table of Contents

 

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2019 and 2018 (Unaudited)

 

The following was included in our balance sheet as of June 30, 2019:

 

Operating leases

 

As of June 30,

2019

 

Assets

 

 

 

ROU operating lease assets

 

$86,293

 

 

 

 

 

 

Liabilities

 

 

54,153

 

Current portion of operating lease

 

 

 

 

Operating lease, net of current portion

 

 

34,697

 

Total operating lease liabilities

 

$88,850

 

Finance leases

 

 

 

 

Assets

 

 

 

 

Property and equipment, gross

 

$157,184

 

Accumulated depreciation

 

 

(22,454)

Property and equipment, net

 

 

134,730

 

Liabilities

 

 

 

 

Current portion of financing lease

 

 

29,891

 

Finance lease, net of current portion

 

 

98,807

 

Total operating lease liabilities

 

$128,698

 

 

The weighted average remaining lease term and weighted average discount rate at June 30, 2019 were as follows:

 

Weighted average remaining lease term (years)

 

June 30, 2019

 

Operating leases

 

 

1.58

 

Finance leases

 

 

4.00

 

Weighted average discount rate

 

June 30, 2019

 

Operating leases

 

 

9.15%

Finance leases

 

 

4.18%

 

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.

 

 
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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2019 and 2018 (Unaudited)

 

The following table reconciles future minimum finance lease payments to the discounted lease liability as of June 30, 2019:

 

Remaining in 2019

 

$17,505

 

2020

 

 

34,888

 

2021

 

 

34,888

 

2022

 

 

34,888

 

2023

 

 

17,768

 

Total lease payments

 

 

139,937

 

Less imputed interest

 

 

(11,239)

Total lease obligations

 

 

128,698

 

Less current obligations

 

 

(29,891)

Long-term lease obligations

 

$98,807

 

 

Operating Lease

 

On December 4, 2015, the Company entered into a new operating lease agreement to rent office space. 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.

 

The following table reconciles future minimum operating lease payments to the discounted lease liability as of June 30, 2019:

 

Remaining in 2019

 

$29,597

 

2020

 

 

61,129

 

2021

 

 

5,109

 

Total lease payments

 

 

95,835

 

Less imputed interest

 

 

(6,985)

Total lease obligations

 

 

88,850

 

Less current obligations

 

 

(54,153)

Long-term lease obligations

 

$34,697

 

 

 
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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2019 and 2018 (Unaudited)

 

(8) Loan Payable

 

On March 18, 2019, the Company secured additional financing of $350,000, net of a $24,465 original issuance discount. The note bears interest at a rate of 13.99% per annum, under a five-year term to aid our growth initiatives. During the period ended June 30, 2019, the Company recorded accretion of $1,427, increasing the carrying value of the note to $313,564.

 

 Future principal and interest payments over the term of the loan as of June 30, 2019 are as follows:

 

For the years ended December 31,

 

Payments

 

Remaining in 2019

 

$45,439

 

2020

 

 

90,879

 

2021

 

 

90,879

 

2022

 

 

90,879

 

2023

 

 

90,879

 

2024

 

 

22,720

 

Total remaining payments

 

$431,675

 

 

(9) 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.

 

 
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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2019 and 2018 (Unaudited)

 

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 June 30, 2019 and December 31, 2018 the Company had 48,336,326 shares of common stock issued and outstanding, respectively.

 

On February 14, 2018, the Company entered into an advisory agreement to assist in product sales and distribution in Asia and the Middle East. The advisor was paid compensation of a total of 2.2 million shares of restricted common stock valued at the closing market price on the date the shares were issued. The first installment of 500,000 shares was issued on February 14, 2018 at $0.035 and the second installment of 1,700,000 shares on April 9, 2018 at $0.04. The total value of shares issued for services aggregated to $85,950. As of June 30,2019, $58,941 of the stock- expense had been recognized and $27,009 remained as a prepaid to be amortized over a two-year service period.

 

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 will aid in corporate strategy, financing and investor relations. He will be paid $5,000 per month for one year and receive a warrant, exercisable into 3,000,000 shares of common stock at an exercise price of $0.03 per share. The warrant has a six month vesting period with a term of ten years.

 

 
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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2019 and 2018 (Unaudited)

 

The following table summarizes the warrants outstanding of the Company during the six month period ended June 30, 2019:

 

 

 

Number of

 

 

Weighted Average

 

 

 

Warrants

 

 

Exercise Price ($)

 

Outstanding at December 31, 2018

 

 

-

 

 

 

-

 

Granted

 

 

3,000,000

 

 

 

.046

 

Exercised

 

 

-

 

 

 

-

 

Expired

 

 

-

 

 

 

-

 

Outstanding at June 30, 2019

 

 

3,000,000

 

 

 

.046

 

 

 

 

 

 

 

 

 

 

Exercisable at June 30, 2019

 

 

-

 

 

 

-

 

 

The Company has calculated the estimated fair market value of these options at $138,000, using the Black-Scholes model and the following assumptions: expected term 5.25 years, stock price $0.046, exercise price $0.03, 140.95% volatility, 2.54% risk free rate, and no forfeiture rate.

 

The Company recognized stock-based compensation of $49,770 and $0 for the six months ended June 30, 2019 and 2018, respectively. As of June 30, 2019, the total remaining unrecognized compensation cost related to non-vested warrants was $88,230.

 

(10) Contingency

 

On May 9,2019, the Company signed an asset purchase agreement to acquire the business assets of Specialty Microwave Corp. (SMW), a privately held company based in nearby Ronkonkoma NY.

 

The purchase will include all business assets of SMW, including all inventory, orders, customers, fixed assets, and all intellectual property and is contingent upon the simultaneous purchase of SMW’s premises at 120 Raynor Ave, Ronkonkoma, NY. The assets will also include all eight team members of SMW. The transactions are conditional on completion of satisfactory due diligence and the execution of a purchase agreement on the premises and all related definitive agreements. The total consideration shall be $2,025,000. The premises was independently appraised at a value of $1,200,000 in 2014. The consideration for the above will be financed through a combination of cash on hand and promissory notes with a 6% interest rate and no prepayment penalties.

 

 
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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2019 and 2018 (Unaudited)

 

(11) Subsequent events

 

In accordance with ASC 855-10, Company management reviewed all material events through the date of this report.

 

On July 2, 2019, Amplitech Group, Inc. entered an engagement letter for strategic intellectual property consulting services with ipCapital Group (“ipCG”), to assist in the formulation and execution ofAmplitech’s intellectual property (“IP”) strategy.

 

Initially, ipCG will assist Amplitech to formulate a comprehensive “ipStory” around its proprietary trade secrets, knowhow and technology. This process is expected to take a couple of months and will be made available to investors once complete.

 

The consideration to be paid to ipCG is $30,000, of which ipCG has agreed to accept 200,000 shares of restricted common stock upon completion of the project at $0.10 per share as payment of $20,000 of the $30,000.

 

On July 2,2019, Amplitech Group Inc. engaged Bentley Securities Corporation as a financial advisor to provide services to Amplitech with regard to its future growth strategy and capital raise. Wayne Homschek is Managing Director of Bentley Securities.

 

The Company shall pay Bentley for services rendered a transaction success fee equal to 6.5% of the value of the gross proceeds that the Company receives in relation to the transaction payable in cash and warrants to purchase 3.5% of all securities outstanding at the close of transaction with an exercise price equal to the price of the transaction with a term of seven years.

 

 
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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.

 

Results of Operations

 

For the Six Months Ended June 30, 2019 and June 30, 2018

 

Revenues

 

Sales increased by $262,198 or approximately 25.03%, when comparing sales for the six months ended June 30, 2019 of $1,309,526 to sales for the six months ended June30, 2018 of $1,047,328. The Company experienced an increase in telecommunication products in both the domestic and the foreign markets due to an increase in marketing efforts.

 

Cost of Goods Sold and Gross Profit

 

Cost of goods sold increased by $196,812 or 46.00% for the six months ended June 30, 2019 compared to the six months ended June 30, 2018. This increase is a result of the increase in sales and outsourcing all orders with significant quantities. Gross profit increased by $65,386 or 10.55% , when comparing the first six months of 2019 to the first six months of 2018 gross profit of $619,498. Gross profit percentage decreased from 59.15% to 52.30% as a result of the product mix with some of our products that are being outsourced having a lower gross profit margin.

 

General and Administrative Expenses

 

General and administrative expenses increased from $501,280 for the first six months of 2018 compared to $543,151for the first six months of 2019, an increase of $41,871 or approximately 8.35%. While our sales and marketing expenses have decreased, the Company experienced an increase in parent company expenses., such as director’s fees, IR/PR fees and stock compensation expense relating to the issuance of warrants.

 

Income (Loss) From Operations

 

As a result of the above, the Company had a net income from operations of $141,733 for the six months ended June 30, 2019 compared to the net income from operations of $118,218 for the six months ended June 30, 2018, an overall increase of $23,515 or 19.89%

 

Other Income (Expenses)

 

Interest expense increased from $3,993 for the first six months of 2018 compared to $14,514 for the first six months of 2019, an increase of $10,521 or 263.49%. While the overall balance of the Company’s line of credit was low during the first half of the year, additional interest expense was incurred for the financing of our equipment lease and loan payable.

 

For the Three Months Ended June 30, 2019 and June 30, 2018

 

Revenues

 

Sales increased by $12,412 or approximately 2.01%, when comparing sales for the three months ended June 30, 2019 of $631,208 to sales for the three months ended June 30, 2018 of $618,787. The overall increase in sales is primarily is due to an increase in telecommunication products in both the domestic and the foreign markets.

 

 
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Cost of Goods Sold and Gross Profit

 

Cost of goods sold increased by $16,265 or 6.40% for the three months ended June 30, 2019 compared to the three months ended June 30, 2018. This increase is directly related to the slight increase in production. This resulted in a 1.05% decrease in gross profit , or $3,844 when comparing the second quarter of 2018 gross profit of $364,610, to the second quarter of 2019 gross profit of $360,766. Gross profit percentage decreased from 58.92% to 57.15% , a decrease of 1.77%. Overall, our gross profit and gross profit percentage has remained consistent with prior year.

 

General and Administrative Expenses

 

General and administrative expenses increased from $290,610 for the three months ended June 30, 2018 compared to $301,681 for the three months ended June 30, 2019, an increase of $11,071. The decrease in sales and marketing expenses were offset by an increase in parent company expenses such as director’s fees, IR/PR fees and stock compensation expense relating to the issuance of warrants.

 

Income From Operations

 

As a result of the above, the Company had net income from operations of $59,085 for the three months ended June 30, 2019 compared to net income from operations of $74,000 for the three months ended June 30, 2018, a decrease of $14,915.

 

Other Income (Expenses)

 

Interest expense increased from $2,545 for the three months ended June 30, 2018 compared to $10,669 for the three months ended June 30, 2019, an increase of $8,124. Additional interest expense was incurred for the financing of our equipment lease and loan payable.

 

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 June 30, 2019, we had $710,067 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 June 30, 2019 we had a working capital surplus of $836,786 and $1,228,521, respectively. We had stockholders’ equity of $915,305 and $1,092,294 at December 31, 2018 and June 30, 2019, respectively.

 

Net cash provided by operating activities was $43,144 for the six months ended June 30, 2019, resulting primarily from net income and the operating changes in accounts receivable, inventory, prepaid expenses, accounts payable and accrued expenses, operating lease liability and customer deposits. Net cash provided by in financing activities for the six months ended June 30, 2019 was $224,825 which resulted from the proceeds received from the Company’s loan payable offset by the repayment of the line of credit and lease financing.

 

As of June 30, 2018, we had $131,174 in cash and cash equivalents compared to $117,990 in cash and cash equivalents as of December 31, 2017. As of December 31, 2017, and June 30, 2018 we had a working capital surplus of $439,811 and $649,903, respectively. We had a stockholders’ equity of $500,362 and $698,837 at December 31, 2017 and June 30, 2018, respectively.

 

Net cash used in operating activities was $23,473 for the six months ended June 30, 2018, resulting primarily from the increase in accounts receivable, inventory, prepaid expenses, accounts payable and accrued expenses and customer deposits. Net cash used in investing activities for the six months ended June 30, 2018 was $2,133 to purchase office equipment. Net cash provided by in financing activities for the six months ended June 30, 2018 was $38,790 which resulted from the proceeds received from the Company’s line of credit.

 

 
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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 by operations and cash on hand will provide enough working capital to fund our operations for the next twelve months.

 

Critical Accounting Policies, Estimates and Assumptions

 

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

 

The discussion and analysis of our financial condition and results of operations is based upon our financial statements 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 six-month period ended June 30, 2019, 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, 2018.

 

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 June 30, 2019, 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.

 

 

 

 

 

Date: July 19, 2019

By:

/s/ Fawad Maqbool

 

 

 

Fawad Maqbool

 

 

 

President and Chief Executive Officer

(Principal Executive Officer)

 

 

Dated: July 19, 2019

By:

/s/ Louisa Sanfratello

 

 

 

Louisa Sanfratello

Chief Financial Officer

(Principal Financial Officer)

 

28