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AmpliTech Group, Inc. - Quarter Report: 2021 June (Form 10-Q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2021

 

or

 

☐     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 001-40069

 

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

Common Stock, par value $0.001 per share

 

AMPG

 

The Nasdaq Stock Market LLC

Warrants to Purchase Common Stock

 

AMPGW

 

The Nasdaq Stock Market LLC

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒     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:

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

 

As of August 10, 2021, the registrant had 9,343,671 shares of common stock, par value $0.001 per share, issued and outstanding.

  

 

 

  

AMPLITECH GROUP, INC.

 

QUARTERLY REPORT ON FORM 10-Q

June 30, 2021

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

 

 

29

 

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

 

33

 

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

 

33

 

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

 

34

 

 

 

 

 

 

 

Item 1A.

Risk Factors

 

 

34

 

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

34

 

 

 

 

 

 

 

Item 3.

Default Upon Senior Securities

 

 

34

 

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

 

34

 

 

 

 

 

 

 

Item 5.

Other Information

 

 

34

 

 

 

 

 

 

 

Item 6.

Exhibits

 

 

35

 

 

 

 

 

 

SIGNATURES

 

 

36

 

  

 
2

Table of Contents

   

Use of Certain Defined Terms

 

Except as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our Company”, “the Company”, “AmpliTech”, “Specialty” or “SMW” are to the combined business of AmpliTech Group, Inc. and its consolidated subsidiaries, AmpliTech, Inc. and Specialty Microwave.

 

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,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$27,624,397

 

 

$199,536

 

Accounts receivable, net

 

 

600,679

 

 

 

357,055

 

Marketable Securities

 

 

1,109,638

 

 

 

-

 

Inventories, net

 

 

806,224

 

 

 

517,338

 

Prepaid expenses

 

 

416,066

 

 

 

322,124

 

Total Current Assets

 

 

30,557,004

 

 

 

1,396,053

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

673,026

 

 

 

289,251

 

Right of use operating lease assets

 

 

300,367

 

 

 

347,156

 

Intangible assets, net

 

 

611,856

 

 

 

632,209

 

Goodwill

 

 

120,136

 

 

 

120,136

 

Investment

 

 

150,000

 

 

 

-

 

Security deposits

 

 

26,707

 

 

 

26,707

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$32,439,096

 

 

$2,811,512

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

352,478

 

 

$113,541

 

Customer deposits

 

 

128,080

 

 

 

15,300

 

Current portion of financing lease

 

 

32,877

 

 

 

32,084

 

Current portion of operating lease

 

 

86,997

 

 

 

87,930

 

Current portion of notes payable

 

 

135,456

 

 

 

205,592

 

Line of credit

 

 

-

 

 

 

200,000

 

Total Current Liabilities

 

 

735,888

 

 

 

654,447

 

 

 

 

 

 

 

 

 

 

Long Term Liabilities

 

 

 

 

 

 

 

 

Finance lease, net of current portion

 

 

34,520

 

 

 

51,159

 

Operating lease, net of current portion

 

 

222,218

 

 

 

267,050

 

Notes payable, net of current portion

 

 

269,424

 

 

 

1,398,574

 

Total Liabilities

 

 

1,262,050

 

 

 

2,371,230

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

Series A convertible preferred stock, par value $0.001, 1,000,000 shares authorized, 0 issued and outstanding

 

 

-

 

 

 

-

 

Common Stock, par value $0.001, 500,000,000 shares authorized, 9,343,671 and 4,839,448 shares issued and outstanding, respectively

 

 

9,344

 

 

 

4,839

 

Additional paid-in capital

 

 

34,388,700

 

 

 

2,303,815

 

Accumulated deficit

 

 

(3,220,998 )

 

 

(1,868,372 )

 

 

 

 

 

 

 

 

 

Total Stockholders’ Equity

 

 

31,177,046

 

 

 

440,282

 

 

 

 

 

 

 

 

 

 

Total Liabilities and

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

$32,439,096

 

 

$2,811,512

 

 

See accompanying notes to the condensed consolidated financial statements

  

 
4

Table of Contents

  

AmpliTech Group, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

For The Three Months Ended

 

 

For The Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$1,024,410

 

 

$660,699

 

 

 

1,497,386

 

 

$1,416,647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

679,787

 

 

 

434,711

 

 

 

1,097,781

 

 

 

951,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

344,623

 

 

 

225,988

 

 

 

399,605

 

 

 

465,302

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

 

1,043,550

 

 

 

442,457

 

 

 

1,952,105

 

 

 

981,018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss From Operations

 

 

(698,927 )

 

 

(216,469 )

 

 

(1,552,500 )

 

 

(515,716 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on extinguishment of debt

 

 

232,200

 

 

 

-

 

 

 

232,200

 

 

 

-

 

Unrealized gain (loss) on investments

 

 

672

 

 

 

-

 

 

 

672

 

 

 

-

 

Interest expense, net

 

 

(6,640 )

 

 

(26,799 )

 

 

(32,998 )

 

 

(50,513 )

Total other income (expense)

 

 

226,232

 

 

 

(26,799 )

 

 

199,874

 

 

 

(50,513 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss Before Income Taxes

 

 

(472,695 )

 

 

(243,268 )

 

 

(1,352,626 )

 

 

(566,229 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision For Income Taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

$(472,695 )

 

$(243,268 )

 

$(1,352,626 )

 

$(566,229 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Per Share;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$(0.05 )

 

$(0.10 )

 

$(0.19 )

 

$(0.23 )

Diluted

 

$(0.05 )

 

$(0.10 )

 

$(0.19 )

 

$(0.23 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

8,863,517

 

 

 

2,476,816

 

 

 

7,225,036

 

 

 

2,476,816

 

Diluted

 

 

8,863,517

 

 

 

2,476,816

 

 

 

7,225,036

 

 

 

2,476,816

 

 

See accompanying notes to the condensed consolidated financial statements

 

 
5

Table of Contents

  

AmpliTech Group, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

For The Six

 

 

For The Six

 

 

 

Months Ended

 

 

Months Ended

 

 

 

June 30,

 

 

June 30,

 

Cash Flows from Operating Activities:

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Net Loss

 

$(1,352,626 )

 

$(566,229 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

50,114

 

 

 

43,595

 

Amortization of prepaid consulting

 

 

134,778

 

 

 

37,108

 

Amortization of right-of-use operating lease asset

 

 

46,789

 

 

 

66,092

 

Stock based compensation

 

 

188,550

 

 

 

23,695

 

Gain on forgiveness of debt

 

 

(232,200 )

 

 

 

 

Change in fair value of marketable securities

 

 

(672 )

 

 

 

 

Changes in Operating Assets and Liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(243,624 )

 

 

217,335

 

Inventories

 

 

(288,886 )

 

 

(87,556 )

Prepaid expenses

 

 

(196,498 )

 

 

(7,873 )

Accounts payable and accrued expenses

 

 

206,715

 

 

 

19,819

 

Operating lease liability

 

 

(45,765 )

 

 

(63,656 )

Customer deposits

 

 

112,780

 

 

 

50,934

 

Net cash used in operating activities

 

 

(1,620,545 )

 

 

(266,736 )

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Purchase of equipment

 

 

(413,536 )

 

 

(9,479 )

Purchase of marketable securities , net

 

 

(1,108,966 )

 

 

-

 

Investment

 

 

(150,000 )

 

 

-

 

Net cash used in investing activities

 

 

(1,672,502 )

 

 

(9,479 )

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Proceeds received from private placement, net of expenses

 

 

20,976,344

 

 

 

-

 

Proceeds received from public offering, net of expenses

 

 

9,449,597

 

 

 

 

 

Proceeds received from exercise of warrants

 

 

1,474,899

 

 

 

-

 

Repayment of line of credit, net

 

 

(200,000 )

 

 

-

 

Repayments on finance lease

 

 

(15,846 )

 

 

(15,225 )

Proceeds from notes payable

 

 

-

 

 

 

232,200

 

Repayment of notes payable

 

 

(967,086 )

 

 

(82,926 )

Net cash provided by financing activities

 

 

30,717,908

 

 

 

134,049

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

27,424,861

 

 

 

(142,166 )

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, Beginning of Period

 

 

199,536

 

 

 

574,712

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, End of Period

 

$27,624,397

 

 

$432,546

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

Cash paid for interest expense

 

$38,400

 

 

$46,665

 

Cash paid for income taxes

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

 Non-Cash Investing and Financing Activities

 

 

 

 

 

 

 

 

Promissory note on equipment

 

$-

 

 

$68,510

 

Finance agreement in exchange for prepaid assets

 

$32,222

 

 

$-

 

Equipment received for prepaid assets

 

$-

 

 

$58,192

 

 

See accompanying notes to the condensed consolidated financial statements

  

 
6

Table of Contents

    

Amplitech Group, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

  

 

 

For the three months ended June 30, 2021

 

 

 

Series A

Convertible Preferred

 

 

Common Stock

 

 

Common

 

 

Additional

 

 

 

 

 

Total

 

 

 

Number of

 

 

Par

 

 

Number of

 

 

Par

 

 

Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Payable

 

 

Capital

 

 

Deficit

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2021

 

 

-

 

 

 

-

 

 

 

6,579,771

 

 

$6,580

 

 

$-

 

 

$12,938,271

 

 

$(2,748,303)

 

$10,196,548

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued in private placement

 

 

 

 

 

 

 

 

 

 

2,715,000

 

 

 

2,715

 

 

 

 

 

 

 

20,973,629

 

 

 

 

 

 

$20,976,344

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued upon exercise of warrants

 

 

 

 

 

 

 

 

 

 

48,900

 

 

 

49

 

 

 

 

 

 

 

342,250

 

 

 

 

 

 

$342,299

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

134,550

 

 

 

-

 

 

 

134,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income(loss) for the three months ended June 30, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(472,695)

 

 

(472,695)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2021

 

 

-

 

 

$-

 

 

 

9,343,671

 

 

$9,344

 

 

$-

 

 

$34,388,700

 

 

$(3,220,998)

 

$31,177,046

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the six months ended June 30, 2021

 

 

 

 

Series A

Convertible Preferred

 

 

 

Common Stock

 

 

 

Common

 

 

 

 

Additional

 

 

 

 

 

 

 

 

Total

 

 

 

 

Number of 

 

 

 

Par

 

 

 

Number of 

 

 

 

Par

 

 

 

 Stock

 

 

 

Paid-In

 

 

 

Accumulated

 

 

 

Stockholders’

 

 

 

 

Shares 

 

 

 

Value

 

 

 

Shares

 

 

 

Value

 

 

 

Payable

 

 

 

Capital 

 

 

 

Deficit

 

 

 

Equity

 

Balance, December 31, 2020

 

 

 

 

 

 

 

 

 

 

4,839,448

 

 

$4,839

 

 

 

 

 

 

 

2,303,815

 

 

 

(1,868,372)

 

$440,282

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued in private placement

 

 

-

 

 

 

-

 

 

 

2,715,000

 

 

 

2,715

 

 

 

-

 

 

 

20,973,629

 

 

 

-

 

 

 

20,976,344

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued in public offering

 

 

 

 

 

 

 

 

 

 

1,571,142

 

 

 

1,578

 

 

 

 

 

 

 

9,448,019

 

 

 

 

 

 

 

9,449,597

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional shares issued in connection to reverse split due to rounding

 

 

 

 

 

 

 

 

 

 

1,381

 

 

 

1

 

 

 

 

 

 

 

(1)

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued upon exercise of warrants

 

 

-

 

 

 

-

 

 

 

210,700

 

 

 

211

 

 

 

-

 

 

 

1,474,688

 

 

 

 

 

 

 

1,474,899

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

188,550

 

 

 

 

 

 

 

188,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income(loss) for the six months ended June 30, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

$(1,352,626)

 

 

(1,352,626)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2021

 

 

-

 

 

$-

 

 

 

9,337,671

 

 

$9,344

 

 

$-

 

 

$34,388,700

 

 

$(3,220,998)

 

$31,177,046

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended June 30, 2020

 

 

 

 

Series A

Convertible Preferred

 

 

 

 

Common Stock

 

 

 

 

Common

 

 

 

Additional

 

 

 

 

 

 

 

 

Total

 

 

 

 

 Number of

 

 

 

Par

 

 

 

Number of 

 

 

 

Par

 

 

 

Stock

 

 

 

Paid-In

 

 

 

Accumulated

 

 

 

Stockholders’

 

 

 

 

Shares 

 

 

 

Value 

 

 

 

Shares 

 

 

 

Value

 

 

 

Payable

 

 

 

Capital 

 

 

 

Deficit

 

 

 

Equity

 

Balance, March 31, 2020

 

 

1,000

 

 

$1

 

 

 

49,086,326

 

 

$49,086

 

 

$24,480

 

 

$1,874,766

 

 

$(1,165,774)

 

$782,559

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11,848

 

 

 

-

 

 

 

11,848

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the three months ended June 30, 2020

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(243,268)

 

 

(243,268)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2020

 

 

1,000

 

 

$1

 

 

 

49,086,326

 

 

$49,086

 

 

$24,480

 

 

$1,886,614

 

 

$(1,409,042)

 

$551,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the six months ended June 30, 2021

 

 

 

 

Series A

Convertible Preferred

 

 

 

Common Stock

 

 

 

Common

 

 

 

Additional

 

 

 

 

 

 

 

 

Total

 

 

 

 

 Number of

 

 

 

Par

 

 

 

Number of

 

 

 

Par

 

 

 

Stock

 

 

 

Paid-In

 

 

 

Accumulated

 

 

 

 Stockholders’

 

 

 

 

Shares 

 

 

 

Value 

 

 

 

Shares

 

 

 

Value

 

 

 

Payable

 

 

 

Capital 

 

 

 

Deficit

 

 

 

Equity

 

Balance, December 31, 2019

 

 

1,000

 

 

$1

 

 

 

49,086,326

 

 

$49,086

 

 

$24,480

 

 

$1,862,919

 

 

$(842,813)

 

$1,093,673

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

23,695

 

 

 

-

 

 

 

23,695

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the six months ended June 30, 2020

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(566,229)

 

 

(566,229)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2020

 

 

1,000

 

 

$1

 

 

 

49,086,326

 

 

$49,086

 

 

$24,480

 

 

$1,886,614

 

 

$(1,409,042)

 

$551,139

 

 

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, 2021 and 2020

 

(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 833,750 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 60,000 shares of the outstanding 889,250 shares of Company common stock, resulting in a change in control. Accordingly, the transaction was accounted for as a reverse acquisition in which AmpliTech, Inc. was deemed to be the accounting acquirer, and the operations of the Company were consolidated for accounting purposes. The capital balances have been retroactively adjusted to reflect the reverse acquisition.

 

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

 

On September 12, 2019, AmpliTech Group Inc. acquired the assets of Specialty Microwave Corporation (SMW), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and all intellectual property. The assets also included all eight team members of SMW.

 

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

 

On February 17, 2021, Amplitech Group Inc., common stock and warrants under the symbols “AMPG” and “AMPGW”, respectively, commenced trading on NASDAQ. A reverse split of the outstanding common stock at a 1-for-20 ratio became effective February 17, 2021 as of 12:01 a.m., Eastern Time. In connection with the public offering, 1,371,428 units at an offering price of $7.00 per unit were sold. Each unit issued in the offering consisted of one share of common stock and one warrant.

 

 
8

Table of Contents

  

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

The COVID-19 Pandemic

 

The COVID-19 pandemic has caused significant worldwide disruption throughout the course of 2020 and into 2021 and resulted in the imposition of various public and private sector measures to try to contain the virus, on a local, state, national and international level, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns. These measures have temporarily impacted our workforce and operations and some of the operations of our customers, and vendors, suppliers, and partners. The ultimate impact and efficacy of government measures and potential future measures is currently unknown.

 

There is uncertainty regarding the business impacts from such measures and potential future measures. While we have been able to continue our operations through a combination of work-from-home and social distancing policies implemented to protect employees, these measures have resulted in reduced workforce availability. We resumed operations on May 5, 2020, with the CDC safeguard guidelines in place. Difficulties in communicating with our customers’ employees and delivery delays due to COVID-19 may impact our ability to meet customer demand, and thus decrease revenues into 2021 and negatively impact our financial condition and results of operations.

 

(2) Summary of Significant Accounting Policies

 

Basis of Accounting

 

The accompanying condensed consolidated financial statements have been prepared using the accrual basis of accounting.

 

The accompanying unaudited interim condensed consolidated financial statements of AmpliTech Group, Inc. (“Group” or the “Company”) have been prepared by management in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for annual audited financial statements. In the opinion of management, all adjustments of a normal recurring nature, considered necessary for a fair presentation have been included.

 

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021. 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, 2020 and 2019 included in Form 10-K filed with the SEC.

  

 
9

Table of Contents

  

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

Principles of Consolidation

 

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

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods presented. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

The Company considers deposits that can be redeemed on demand and investments and marketable securities that have original maturities of less than three months, when purchased, to be cash equivalents. As of June 30, 2021, the Company’s cash and cash equivalents were deposited in three financial institutions.

 

Accounts Receivable

 

Trade accounts receivables 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 $113,670 and $125,400 has been recorded at June 30, 2021 and December 31, 2020.

 

Marketable Securities

 

The Company’s investments have been classified as available-for-sale securities in accordance with U.S. GAAP. Marketable securities are categorized on the consolidated condensed balance sheet as Marketable Securities, within the short-term or long-term classification, as appropriate.

  

 
10

Table of Contents

  

AmpliTech Group, Inc. 

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

Inventories

 

Inventories, which consist primarily of raw materials, work in progress and finished goods, is stated at the lower of cost (first-in, first-out basis) or market (net realizable value).

 

Inventory quantities and related values are analyzed at the end of each fiscal quarter to determine those items that are slow moving and obsolete. An inventory reserve is recorded for those items determined to be slow moving with a corresponding charge to cost of goods sold. Inventory items that are determined obsolete are written off currently with a corresponding charge to cost of goods sold.

 

Property and Equipment

 

Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements.

 

Property and equipment are depreciated as follows:

 

Description

 

Useful Life

 

Method

Office equipment

 

7 years

 

Straight-line

Machinery and equipment

 

5 to 10 years

 

Straight-line

Computer equipment

 

3 to 7 years

 

Straight-line

Vehicles

 

5 years

 

Straight-line

 

Long-lived assets

 

Long lived assets, such as property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Circumstances which could trigger a review include, but are not limited to; significant decrease in the market price of the asset; significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.

 

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount of fair value less costs to sell and would no longer be depreciated. The depreciable basis of assets that are impaired and continue in use is their respective fair values.

  

 
11

Table of Contents

  

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

Investment Policy-Cost Method

 

Investments consist of non-controlling equity investments in privately held companies. The Company elected the measurement alternative for these investments without readily determinable fair values and for which the Company does not control or have the ability to exercise significant influence over operating and financial policies. These investments are accounted for under the cost method of accounting. Under the cost method of accounting, the non-marketable equity securities are carried at cost less any impairment, adjusted for observable price changes of similar investments of the same issuer. Fair value is not estimated for these investments if there are no identified events or changes in circumstances that may have an effect on the fair value of the investment. Under this method, the Company’s share of the earnings or losses of such investee companies is not included in the consolidated balance sheet or consolidated statements of operations. The Company held $150,000 of investments without readily determinable fair values at June 30, 2021 (see Note 8). These investments are included in other assets on the condensed consolidated balance sheets. There were no impairment charges for the three and six months ended June 30, 2021.

 

Goodwill and Intangible Assets

 

Intangible assets include goodwill, trademarks, intellectual property and customer base acquired through the asset purchase of Specialty Microwave. The Company accounts for Other Intangible Assets under the guidance of ASC 350, “Intangibles-Goodwill and Other.” Under the guidance, other intangible assets with definite lives are amortized over their estimated useful lives. Intangible assets with indefinite lives are tested annually for impairment. Goodwill is not amortized. We test goodwill balances for impairment annually at December 31 or whenever impairment indicators arise.

 

Leases

 

On January 1, 2019, we adopted ASU No. 2016-02, “Leases (Topic 842),” which requires leases with durations greater than twelve months to be recognized on the balance sheet. We adopted this standard using the modified retrospective approach with an effective date as of the beginning of January 2019. Prior year financial statements were not restated under the new standard. We lease property and equipment under finance and operating leases. For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the lease term. The Company has elected not to separate lease and non-lease components for all property leases for the purpose of calculating ROU assets and lease liabilities. Many of our leases include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when appropriate. When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis considering such factors as lease term and economic environment risks.

 

Revenue Recognition

 

We sell our products through a combination of a direct sales force in the United States and independent sales representatives in international markets. Revenue is recognized when a customer obtains control of promised goods based on the consideration we expect to receive in exchange for these goods. This core principle is achieved through the following steps:

 

Identify the contract with the customer. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We do not have significant costs to obtain contracts with customers. For commissions on product sales, we have elected the practical expedient to expense the costs as incurred.

 

Identify the performance obligations in the contract. Generally, our contracts with customers do not include multiple performance obligations to be completed over a period.

   

 
12

Table of Contents

  

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

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.

 

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, 2021 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 operations for the six months ended June 30, 2021 and 2020.

 

Research and Development

 

Research and development expenditures are charged to operations as incurred. The major components of research and development costs include consultants, outside service, and supplies. Research and development costs for the six months ended June 30, 2021 and 2020 were $ 62,962 and $ 23,715.

 

Income Taxes

 

The Company’s deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of certain assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At June 30, 2021, the Company had no material unrecognized tax benefits.

   

 
13

Table of Contents

  

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

Earnings Per Share

 

Basic earnings per share (“EPS”) are determined by dividing the net earnings by the weighted-average number of shares of common shares outstanding during the period. Diluted EPS is determined by dividing net earnings by the weighted average number of common shares used in the basic EPS calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding under the treasury stock method. As of June 30, 2021 and 2020, there were 3,304,442 and 2,155,000, respectively, potentially dilutive shares that need to be considered as common share equivalents.

 

The computation of weighted average shares outstanding and the basic and diluted earnings per share consisted of the following:

 

 

 

Net (Loss)

Income

 

 

Shares

 

 

Per Share

Amount

 

 

 

 

 

 

 

 

 

 

 

For the three months ended June 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

$(472,695 )

 

 

8,863,517

 

 

$(0.05 )

Effect of dilutive stock options, warrants and series A shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

$(472,695 )

 

 

8,863,517

 

 

$(0.05 )

For the three months ended June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

$(243,268 )

 

 

2,476,816

 

 

$(0.10

Effect of dilutive stock options, warrants and series A shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

$(243,268 )

 

 

2,476,816

 

 

$(0.10

 

 

 

Net (Loss)

Income

 

 

Shares

 

 

Per Share

Amount

 

 

 

 

 

 

 

 

 

 

 

For the six months ended June 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

$(1,352,626 )

 

 

7,225,036

 

 

$(0.19 )

Effect of dilutive stock options, warrants and series A shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

$(1,352,626 )

 

 

7,225,036

 

 

$(0.19 )

For the six months ended June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

$(556,229 )

 

 

2,476,816

 

 

$(0.23 )

Effect of dilutive stock options, warrants and series A shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

$(556,229 )

 

 

2,476,816

 

 

$(0.23 )

   

 
14

Table of Contents

  

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

  

Fair Value of Assets and Liabilities

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined in the following categories as follows:

 

Level 1. Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Cash and cash equivalents are valued using inputs in Level 1.

 

Level 2. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

Level 3. Inputs that are both significant to the fair value measurement and unobservable. These inputs rely on management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. The unobservable inputs are developed based on the best information available in the circumstances and may include the Company’s own data.

 

Fair Value of Marketable Securities

 

The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements do not include transaction costs.

 

A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is divided into the following three categories:

 

Level 1. Quoted market prices in active markets for identical assets or liabilities.

 

Level 2. Observable market-based inputs or inputs that are corroborated by market data.

 

Level 3. Unobservable inputs that are not corroborated by market data.

 

Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value. Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from financial instruments and any declines in the value of investments are temporary in nature. Money market funds and certificates of deposits are shown at cost on the balance sheet and their adjusted cost approximates their fair value.

 

Stock-Based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employees required service period, which is generally the vesting period.

 

Concentration of Credit Risk

 

Financial instruments that potentially subject the company to concentration of credit risk consist primarily of cash. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At June 30, 2021 and December 31, 2020, the Company had $27,374,397 and $0 in excess of the FDIC insured limit, respectively.

   

 
15

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

Recent Accounting Pronouncements

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. This ASU removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We are currently assessing the impact of this standard on our consolidated financial statements.

 

On August 5, 2020, FASB issued ASU 2020-06, which is expected to reduce complexity and improve comparability of financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity. The ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, with an early adoption permitted. The adoption of this standard became effective for us on January 1, 2021 and 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 and for the three and six months ended:

 

 

 

For the three months ended

 

 

For the six months ended

 

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic sales

 

$857,630

 

 

$553,469

 

 

$1,260,141

 

 

$1,173,671

 

International sales

 

 

167,780

 

 

 

107,230

 

 

 

237,245

 

 

 

242,976

 

Total sales

 

$1,024,410

 

 

$660,699

 

 

$1,497,386

 

 

$1,416,647

 

  

 
16

Table of Contents

 

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

(4) Marketable Securities

 

The following table is a summary of marketable securities at June 30, 2021:

 

 

 

 Amortized

 

 

 Gross realized

 

 

 Gross unrealized

 

 

 Estimated

 

 

 

 Cost

 

 

 Gain

 

 

 Loss

 

 

 Fair Value

 

Equities

 

 

958,296

 

 

 

6,994

 

 

 

(5,822 )

 

 

959,468

 

Fixed Income

 

 

100,950

 

 

 

10

 

 

 

 

 

 

 

100,960

 

Other

 

 

49,720

 

 

 

 

 

 

 

(510 )

 

 

49,210

 

Total Securities

 

$1,108,966

 

 

$7,004

 

 

$(6,332 )

 

$1,109,638

 

 

Cash and cash equivalents at June 30, 2021 was $3,888,974.

 

The disclosed instruments above are considered a level 1 instrument.

 

When evaluating an investment for impairment, the Company reviews factors including the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, changes in market interest rates and whether it is more likely than not the Company will be required to sell the investment before recovery of the investment’s cost basis. As of June 30, 2021, the Company does not consider any of its investments to be impaired.

 

(5) Inventories

 

The inventory value at June 30, 2021 and December 31, 2020 were as follows:

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Raw Materials

 

$493,405

 

 

$325,251

 

Work-in Progress

 

 

221,487

 

 

 

129,882

 

Finished Goods

 

 

156,606

 

 

 

128,479

 

Engineering Models

 

 

3,726

 

 

 

3,726

 

 

 

 

 

 

 

 

 

 

Subtotal

 

$875,224

 

 

$587,338

 

Less: Reserve for

 

 

 

 

 

 

 

 

Obsolescence

 

 

(69,000 )

 

 

(70,000 )

 

 

 

 

 

 

 

 

 

Total

 

$806,224

 

 

$517,338

 

   

 
17

Table of Contents

  

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

(6) Property and Equipment

 

Property and Equipment consisted of the following at June 30, 2021 and December 31, 2020:

 

 

 

 June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Lab Equipment

 

$1,276,898

 

 

$865,414

 

Manufacturing Equipment

 

 

25,000

 

 

 

25,000

 

Automobiles

 

 

19,527

 

 

 

19,527

 

Furniture and Fixtures

 

 

38,217

 

 

 

36,165

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

1,359,642

 

 

 

946,106

 

Less: Accumulated Depreciation

 

 

(686,616 )

 

 

(656,855 )

 

 

 

 

 

 

 

 

 

Total

 

$673,026

 

 

$289,251

 

 

Depreciation expense for the six months ended June 30, 2021 and 2020 was $29,761 and $23,064 respectively.

 

(7) Intangible Assets

 

Goodwill

 

The goodwill is related to the acquisition of Specialty Microwave Corp. on September 12, 2019 and is primarily related to expected improvements and technology performance and functionality, as well sales growth from future product and service offerings and new customers, together with certain intangible assets that do not qualify for separate recognition. Goodwill is generally not amortizable for tax purposes and is not amortizable for financial statement purposes. As of June 30, 2021 and December 31, 2020, goodwill was valued at $120,136.

 

Other Intangible Assets

 

Intangible assets with an estimated useful life of fifteen years consisted of the following at June 30, 2021:

 

 

 

Gross Carrying

 

 

Accumulated

 

 

 

 

Weighted

Average

 

 

 

Amount

 

 

Amortization

 

 

Net 

 

 

Life

 

Trade name

 

$70,233

 

 

$-

 

 

$70,233

 

 

Indefinite

 

Customer relationships

 

 

412,860

 

 

 

49,543

 

 

 

363,317

 

 

 

13.0

 

Intellectual Property

 

 

202,771

 

 

 

24,465

 

 

 

178,306

 

 

 

13.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$685,864

 

 

$74,008

 

 

$611,856

 

 

 

 

 

 

Amortization expense for the years ended June 30, 2021 and 2020 was $20,353 and $20,531 respectively.

   

 
18

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

Annual amortization of intangible assets are as follows:

 

2021

 

 

20,689

 

2022

 

 

41,042

 

2023

 

 

41,042

 

2024

 

 

41,042

 

2025

 

 

41,042

 

Thereafter

 

 

356,766

 

 

 

$541,623

 

 

(8) Cost-Method Investment

 

On June 10, 2021, the Company entered into a membership interest purchase agreement with SN2N, LLC for an aggregate purchase price of $350,000, to be paid in four tranches. Each tranche represents a 5% membership interest, and in aggregate a 20% membership interest. SN2N plans to design and manufacture an un-hackable communications channel that creates a new security paradigm; a state-of-the art signal amplification secured by intelligence-community-caliber hardware encryption. Amplitech would serve as exclusive manufacturer for the low noise amplifier product line used with this encryption technology. As of June 30, 2021, the Company has made an investment of $150,000 for a 10% membership interest.

 

(9) Line of Credit

 

On November 20, 2020, AmpliTech entered into a business line of credit for $750,000 maturing on November 1, 2021. The line is evaluated monthly on a borrowing base formula advancing 75% of accounts receivables aged less than 90 days and 50% of inventory raw materials costs. The interest rate shall be based upon the Wall Street Journal Prime Rate, plus 1%. The Company has the option to prepay all or any portion of the amount owed prior to its due date without penalty.

 

In connection with the loan, the Company granted the lender a security interest in all of its respective assets. In addition, the President and CEO, has agreed to guarantee the loan.

 

As of June 30, 2021, and December 31, 2020, the outstanding balance on the line of credit was $0 and $200,000, respectively.

 

(10) 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.

   

 
19

Table of Contents

  

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

The following was included in our balance sheet as of June 30, 2021:

 

Operating leases

 

 June 30,

 2021

 

 

 

 

 

Assets

 

 

 

ROU operating lease assets

 

$300,367

 

 

 

 

 

 

Liabilities

 

 

 

 

Current portion of operating lease

 

$86,997

 

Operating lease, net of current portion

 

$222,218

 

Total operating lease liabilities

 

$309,215

 

 

 

 

 

 

Finance leases

 

 

 

 

Assets

 

 

 

 

Property and equipment, gross

 

$157,184

 

Accumulated depreciation

 

 

(67,364 )

Property and equipment, net

 

$89,820

 

Liabilities

 

 

 

 

Current portion of financing lease

 

$32,877

 

Finance lease, net of current portion

 

 

34,520

 

Total operating lease liabilities

 

$67,397

 

 

The weighted average remaining lease term and weighted average discount rate at June 30, 2021 were as follows:

 

Weighted average remaining lease term (years)

 

June 30,

2021

 

Operating leases

 

 

3.27

 

Finance leases

 

 

2.00

 

Weighted average discount rate

 

 

 

 

Operating leases

 

 

5.96%

Finance leases

 

 

4.89%

   

 
20

Table of Contents

  

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

Finance Lease

 

The Company entered into a 60-month lease agreement to finance certain laboratory equipment in July 2018 with a purchase option of $1. As such, the Company has accounted for this transaction as a finance lease.

 

The following table reconciles future minimum finance lease payments to the discounted lease liability as of June 30, 2021:

 

2021

 

 

18,889

 

2022

 

 

37,778

 

2023

 

 

18,889

 

Total lease payments

 

 

75,556

 

Less imputed interest

 

 

(3,485 )

Less sales tax

 

 

(4,674 )

Total lease obligations

 

 

67,397

 

Less current obligations

 

 

(32,877 )

Long-term lease obligations

 

$34,520

 

 

Operating Leases

 

On December 4, 2015, the Company entered into a new operating lease agreement to rent office space in Bohemia, NY. This five-year agreement commenced February 1, 2016 with an annual rent of $50,000 and 3.75% increases in each successive lease year. On January 13, 2021, a lease rider was annexed to the original lease whereby the lease term will be extended on a month-by-month basis, commencing on February 1, 2021.

 

On January 15, 2016, the Company entered into a five-year agreement to lease 2 copiers with and annual payment of $2,985. This lease was terminated on November 16, 2020 and the Company entered into a new five-year agreement to lease 2 copiers with an annual payment of $3,976.

 

On September 12, 2019, the Company entered into a new operating lease agreement to rent office space in Ronkonkoma, NY. This five- year agreement commenced on September 12, 2019 with an annual rent of $90,000 and 3% increase in each successive lease year beginning in 2021. The Company has an option to buy the property during the first two years of the lease for $1,200,000 and then at fair market value for the remainder of the lease term.

 

On November 27, 2019, the Company entered a 39-month agreement to lease an automobile with a monthly payment of $420.

   

 
21

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

The following table reconciles future minimum operating lease payments to the discounted lease liability as of June 30, 2021:

 

2021

 

 

50,856

 

2022

 

 

104,497

 

2023

 

 

102,741

 

2024

 

 

79,948

 

2025

 

 

3,645

 

Total lease payments

 

 

341,687

 

Less imputed interest

 

 

(32,472 )

Total lease obligations

 

 

309,215

 

Less current obligations

 

 

(86,997 )

Long-term lease obligations

 

$222,218

 

 

(11) Notes Payable

 

Promissory Note:

 

On September 12, 2019, AmpliTech Group Inc. acquired Specialty Microwave Corporation (SMW), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and all intellectual property. The assets also included all eight team members of SMW. The total consideration paid was $1,143,633, consisting of $668,633 in cash and a $475,000 promissory note with an interest rate of 6%. Beginning November 1, 2019, payment of principal and interest shall be due payable in fifty-nine (59) monthly payments of $9,213 with a final payment due October 1, 2024 of $9,203. As of June 30, 2021, the balance of this promissory note was $332,522. Principal payments of $36,993 along with interest expense of $9,075 was paid during the six months ended June 30, 2021. The promissory note is secured by certain assets of the Company.

 

Loan Payable:

 

On September 12, 2019, the Company entered a $1,000,000 seven-year term loan with amortization based on a ten- year repayment schedule. The loan bears interest at a fixed rate of 6.75% with a monthly repayment amount of $11,533. On May 10, 2021, the Company paid off the balance of the seven-year term loan. In the six month period, $909,036 of principal payments and interest of $23,999 were paid.

  

 
22

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

On April 20, 2020, the Company entered into a Paycheck Protection Program Promissory Note (“PPP Note”) in the principal amount of $232,200 (“PPP Loan”) from BNB Bank (“PPP Loan Lender”). The PPP Loan was obtained pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) administered by the U.S Small Business Administration (“SBA”). The PPP Loan was disbursed by the PPP Loan Lender on April 20, 2020 (the “Disbursement Date).

 

On April 20, 2021, SBA approved the PPP loan forgiveness of $232,200.

 

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

 

 

·

On December 20, 2019, the Company borrowed $58,192 to be paid over a three-year term with monthly payments of $ 1,736 at an interest rate of 5.26%. The balance as of June 30, 2021 was $28,441 Total interest expense paid during the six months ended June 30, 2021 was $845.

 

 

 

 

·

On May 14, 2020, the Company borrowed $27,494 to be paid over a three-year term with monthly payments of $815 at an interest rate of 4.268%. The balance as of June 30, 2021 was $17,177. Total interest expense paid during the six months ended June 30, 2021 was $447.

 

 

 

 

·

On June 10, 2020, the Company borrowed $41,015 to be paid over a three-year term with monthly payments of $1,216 at an interest rate of 4.278%. The balance as of June 30, 2021 was $26,740. Total interest expense paid during the six months ended June 30, 2021 was $693.

 

Future principal payments over the term of the loans as of June 30, 2021 are as follows:

 

 

 

Payments

 

2021

 

 

66,767

 

2022

 

 

137,623

 

2023

 

 

110,894

 

2024

 

 

89,596

 

 

 

 

 

 

Total remaining payments

 

$404,880

 

 

(12) Stockholders’ Equity

 

The total number of shares of stock this Corporation is authorized to issue shall be five hundred one million (501,000,000) shares, par value $0.001 per share. Our authorized capital stock consists of 500,000,000 shares of common stock and 1,000,000 shares of blank check preferred stock.

  

 
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AmpliTech Group, Inc. 

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

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. On October 7, 2020, the Board of Directors of the Company approved a certificate of amendment to the articles of incorporation and changed the total number of authorized shares of Preferred Stock to be 1,000,000 shares, $0.001 per share.

 

On October 7, 2020, our Board of Directors and our stockholders approved a resolution to amend and restate the certificate of designation of preferences, rights and limitations of Series A Convertible Preferred Stock to restate that there are 401,000 shares of the Company’s blank check Preferred Stock designated as Series A Convertible Preferred Stock. The amended and restated certificate clarifies that the Series A Convertible Preferred Stock convert at a rate of five shares of the Company’s common stock for every share of Series A Convertible Preferred Stock, and also restates that the Series A Convertible Preferred Stock shall be entitled to vote on all matters submitted to shareholders of the Company for each share of Series A Convertible Preferred Stock owned on the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, on the date such vote is taken or any written consent of shareholders is solicited. The number of votes entitled to be cast by the holders of the Series A Convertible Preferred Stock equals that number of votes that, together with votes otherwise entitled to be cast by the holders of the Series A Convertible Preferred Stock at a meeting, whether by virtue of stock ownership, proxies, voting trust agreements or otherwise, entitle the holders to exercise 51% of all votes entitled to be cast to approve any action which Nevada law provides may or must be approved by vote or consent of the holders of common stock entitled to vote.

 

On November 20, 2020, the Company issued 2,005,000 shares of common stock to Fawad Maqbool, the Chief Executive Officer of the Company. 5,000 of the shares were issued at par value upon the conversion of 1,000 shares of Preferred Stock. The remaining 2,000,000 of the shares were issued pursuant to the exercise by Mr. Maqbool of options to purchase 400,000 shares of Preferred Series A stock, at an exercise price of $1.03 per share, which were then converted into 2,000,000 shares of Common Stock.

 

On December 23, 2020, the Company filed amended and restated articles of incorporation to keep the authorized shares of Common Stock at 500,000,000 and set the authorized shares of blank check preferred stock at 1,000,000. On December 23, 2020, the Company filed an amended and restated certificate of designation of preferences, rights and limitations of the Series A Convertible Preferred Stock.

  

 
24

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

Common Stock:

 

The Company originally authorized 50,000,000 shares of common stock with a par value of $0.001. Effective May 20, 2014, the Company increased its authorized shares of common stock from 50,000,000 to 500,000,000.

 

On December 7, 2020, the Board of Directors approved a reverse stock split of the Company’s common stock, in connection with a potential listing onto NASDAQ in a ratio to be determined by the Board based on market conditions and the Company’s trading price at the time of such reverse split in the range of 1:20 to 1:200, while the authorized shares of common stock remain at 500,000,000. A reverse stock split of the outstanding common stock at a 1-for-20 ratio became effective February 17, 2021. All per share amounts and number of shares in the condensed consolidated financial statements and related notes have been retroactively restated to reflect the reverse stock split.

 

On October 15, 2019, the Company engaged Maxim Group LLC (“Maxim”) as its financial advisor to assist the Company in growth strategy to the investment community with the ultimate goal of an up-list and capital raise on NASDAQ.

 

As consideration for Maxim’s services, Maxim shall be entitled to receive, and the Company agrees to pay Maxim, the following compensation:

 

 

(a)

The Company will issue to Maxim or its designees 100,000 shares of the Company’s Common Stock (“Common Stock”) based on the following schedule:

 

 

i.

27,500 restricted shares of Common Stock upon the execution of the Agreement implying a price per share of $0.10. These shares were valued on October 15, 2019 at $0.054 with a value of $29,920. The full amount of $29,920 was expensed as consulting fees in 2020 and the shares were issued on January 13, 2020.

 

 

 

 

ii.

$54,000 payable in 22,500 restricted shares of Common Stock six months from the date of the Agreement implying a price per shares of $0.12. These shares were valued on October 15, 2019 at a price of $0.054 with a value of $24,480 and classified as common stock subscription payable as they had not been issued. On July 9, 2020, Maxim was issued 22,500 shares of common stock in exchange for the common stock subscription payable. The full amount of consulting fees was expensed in 2019.

 

 

 

 

iii.

50,000 restricted shares of Common Stock 90 days following the placement agency agreement dated April 15, 2021. These shares were valued on October 15, 2019 at a price of $0.054 with a value of $54,000 and expensed as consulting fees for the three months ended March 31, 2021.

 

On July 9, 2020, Maxim was issued 22,500 shares of common stock in exchange for common stock payable.

  

 
25

Table of Contents

  

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

On July 28, 2020, Wayne Homschek elected to exercise 150,000 of his cashless warrants and 102,632 shares of common stock was issued.

 

On October 12, 2020, the Company engaged service providers for services related to the NASDAQ up list totaling $100,000. The Company issued 100,000 shares on December 18, 2020 under the Company’s equity incentive plan immediately following the filing of a Registration Statement on Form S-8 and were issued without restrictions. These services have been expensed as of March 31, 2021.

 

On October 16, 2020, the Company entered into an advisory agreement to assist in product sales and distribution in Asia and the Middle East. The advisor will be paid compensation of 100,000 shares totaling $108,000 over a two- year period. These shares were issued under the Company’s equity incentive plan immediately following the filing of a Registration Statement on Form S-8 and were issued without restrictions. As of June 30, 2021, $38,022 of expense had been recognized and $69,978 remained as a prepaid to be amortized over a two-year period.

 

On October 16, 2020, the Company entered into a public relations service agreement whereby the consultant will be paid compensation of 25,000 shares totaling $27,000 over a nine-month period. These shares were issued under the Company’s equity incentive plan immediately following the filing of a Registration Statement on Form S-8 and were issued without restrictions. As of June 30, 2021, $27,000 of expense had been recognized

 

On November 20, 2020, the Company issued 2,005,000 shares of common stock to Fawad Maqbool, the Chief Executive Officer of the Company. 5,000 of the shares were issued at par value upon the conversion of 1,000 shares of Preferred Stock. The remaining 2,000,000 of the shares were issued pursuant to the exercise by Mr. Maqbool of options to purchase 400,000 shares of Preferred Series A stock, at an exercise price of $1.03 per share, which were then converted into 2,000,000 shares of Common Stock.

 

On December 18, 2020, the Company issued 30,000shares of common stock under the Company’s stock option plan as stock compensation totaling $90,000.

 

On February 17, 2021, Amplitech Group Inc., common stock and warrants under the symbols “AMPG” and “AMPGW”, respectively, commenced trading on NASDAQ. In connection with the public offering, 1,371,428 units at an offering price of $7.00 per unit were sold. Each unit issued in the offering consisted of one share of common stock and one warrant. Maxim Group LLC acted as sole book-running manager for the offering. Net proceeds received was $8,119,502.

 

On February 24, 2021, Maxim Group LLC exercised its overallotment option to purchase an additional 205,714 shares of common stock. Net proceeds received was $1,330,095.

 

From March 8 to March 12, 2021, 161,800 warrants were exercised at a price of $7.00 and 161,800 shares of common stock were issued. Total cash proceeds received were $1,132,600.

 

From April 1 through April 6, 2021, 48,900 warrants were exercised at an exercise price of $7.00 and 48,900 shares of common stock were issued. Gross proceeds received were $342,300.

   

 
26

Table of Contents

  

AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

On April 15, 2021, the Company entered into definitive agreements with certain institutional investors for the sale of 2,715,000shares of common stock in a registered direct offering priced at-the-market under NASDAQ rules. Concurrently, the Company agreed to issue to the investors, in a private placement, warrants to purchase an aggregate of 1,900,500 shares of common stock at an exercise price of $8.48 per share with a five-year term. Maxim Group LLC acted as the exclusive placement agent for this offering. The shares of common stock as described were offered pursuant to a “shelf” registration statement filed with the SEC on April 1, 2021 and declared effective on April 14, 2021. The aggregate gross proceeds to the Company were approximately $23 million dollars before deducting placement agent’s fees and expenses. The offering closed on April 16, 2021. On April 30, 2021, the Company filed a registration statement providing for the resale of the shares of common stock issuable upon the exercise of the warrants issued in the private placement. The registration statement became effective on May 11, 2021.

 

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. On November 20, 2020 cash proceeds of $8,241 were received and the options were exercised for 2,000,000 shares of common stock.

 

On June 30, 2021, the Company granted ten-year nonqualified stock options, which vest in full on the date of the grant, to purchase 12,500 shares of common stock pursuant to the Company’s 2020 Equity Incentive Plan to each of our Board of Directors, Mr. Lee, Mr. Kappers, and Mr. Mazziota, with an exercise price of $4.63 per share.

 

The Company has calculated the estimated fair market value of these options at $134,550 using the Black-Scholes model and the following assumptions: expected term 2.5 years, stock price $4.63, exercise price $4.63, 153.1% volatility, .36% risk free rate, and no forfeiture rate.

 

Stock options outstanding are as follows:

 

 

 

Number of

 

 

Weighted Average

 

 

 

Options

 

 

Exercise Price ($)

 

Outstanding at December 31, 2020

 

 

-

 

 

 

-

 

Granted

 

 

37,500

 

 

$4.63

 

Exercised

 

 

-

 

 

 

-

 

Expired

 

 

-

 

 

 

-

 

Outstanding at June 30, 2021

 

 

37,500

 

 

$4.63

 

Exercisable at June 30, 2021 

 

 

37,500

 

 

$4.63

 

 

As of June 30, 2021, the stock options had no intrinsic value.

 

The weighted average useful life of the outstanding and exercisable options is five years.

 

Warrants:

 

On February 17, 2021, Amplitech Group Inc., common stock and warrants under the symbols “AMPG” and “AMPGW”, respectively, commenced trading on NASDAQ. In connection with the public offering, 1,371,428 units at an offering price of $7.00 per unit were sold. Each unit issued in the offering consisted of one share of common stock and one warrant. Maxim Group LLC acted as sole book-running manager for the offering and partially exercised its overallotment option to purchase 205,714 warrants at the public offering price.

 

From March 8 to March 12, 2021, 161,800 warrants were exercised at a price of $7.00 and 161,800 shares of common stock were issued.

 

From April 1 through April 6, 2021, 48,900 warrants were exercised at an exercise price of $7.00 and 48,900 shares of common stock were issued.

 

On April 15, 2021, the Company entered into definitive agreements with certain institutional investors for the sale of 2,715,000 shares of common stock in a registered direct offering priced at-the-market under NASDAQ rules. Concurrently, the Company agreed to issue to the investors, in a private placement, warrants to purchase an aggregate of 1,900,500 shares of common stock at an exercise price of $8.48 per share with a five-year term.

   

 
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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2021 and 2020

 

 

 

 

 

 

 

 

 

 

Number of

Warrants

 

 

Weighted Average

Exercise Price ($)

 

Outstanding at December 31, 2020

 

 

-

 

 

 

-

 

Granted

 

 

3,477,642

 

 

$7.86

 

Exercised

 

 

(210,700)

 

$(7.00)

Expired

 

 

-

 

 

 

-

 

Outstanding at June 30, 2021

 

 

3,266,942

 

 

$7.86

 

Exercisable at June 30, 2021

 

 

3,266,942

 

 

$7.86

 

  

As of June 30, 2021, the warrants had no intrinsic value.

 

The average remaining life of the outstanding and exercisable warrants is 6.83 years.

 

2020 Equity Incentive Plan

 

In October 2020, the Board of Directors and shareholders adopted the Company’s 2020 Equity Incentive Plan (the “2020 Plan”), effective as of December 14, 2020. Under the 2020 Plan, the Company reserved 1,250,000 shares of common stock to grant shares of common stock of the Company to employees and individuals who perform services for the Company. The purpose of the 2020 Plan is to attract and retain the best available personnel for positions of substantial responsibility, to provide incentives to individuals who perform services for the Company, and to promote the success of the Company’s business. The 2020 Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares and other stock or cash awards as the Board of Directors may determine.

 

(13) Commitments and Contingencies

 

None applicable

 

(14) Subsequent events

 

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

 

On July 26, 2021, 52,000 incentive/non-qualified stock options were issued to various employees and consultants. The options have a strike price of $3.88 and a ten-year term. The options shall vest in equal quarterly installments over a three-year period commencing one year after the date of grant.

   

 
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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

 

AmpliTech designs, engineers and assembles micro-wave component-based amplifiers that meet individual customer specifications. Our products consist of radio frequency (“RF”) amplifiers and related subsystems, operating at multiple frequencies from 50kHz to 44GHz, including low noise amplifiers, medium power amplifiers, cryogenic amplifiers, and custom assembly designs for the aerospace, governmental, defense and commercial satellite markets. We also offer non-recurring engineering services on a project-by-project basis, for a predetermined fixed contractual amount, or on a time plus material basis.

 

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

 

Our mission is to patent our proprietary IP and trade secrets that were used in small volume niche markets and expand our capabilities through strategic partnerships, joint ventures, mergers/acquisitions with key industry leaders in the 5G/6G, quantum computing, and cybersecurity markets. We believe this will enable us to scale up our products and revenue by developing full systems and subsystems with our unique technology as a core component, which we expect will position us as a global leader in these rapidly emerging technology sectors and addresses large volume markets as well, such as cellphone handsets, laptops, server networks, and many other applications that improve everyday quality of life.

 

We believe our research and development initiative to expand our product line of low noise amplifiers to include our new 5G and wireless infrastructure products is progressing significantly. We have introduced new products that will be manufactured through our SMW acquisition. The combined engineering and manufacturing resources is expected to complement the new product development of subsystems for satellite, wireless, and 5G infrastructures, as well as advanced military and commercial market.

 

Corporate Information

 

Our principal executive offices are located at 620 Johnson Avenue Bohemia, NY 11716. Our telephone number is (631) 521-7831. Our corporate website is www.amplitechinc.com. The information on our website is not a part of, or incorporated in, this prospectus.

 

Recent Developments

 

On April 15, 2021, we entered into purchase agreements with certain institutional investors for the sale of an aggregate of 2,715,000 shares of common stock at a purchase price of $8.48 per share in a registered direct offering.

 

In a concurrent private placement, the Company sold to the investors, warrants to purchase an aggregate of 1,900,500 shares of common stock at an exercise price of $8.48 per share with a five-year term. The exercise price of the warrants and the number of shares of the common stock issuable upon the exercise of the warrants are subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the warrants. The warrants are exercisable on a “cashless” basis in certain circumstances.

 

The closing of the sale of the shares of common stock in the registered direct offering, and the sale of the warrants in the concurrent private placement, occurred on April 16, 2021.

 

On April 30, 2021, the Company filed a registration statement providing for the resale of the shares of common stock issuable upon the exercise of the warrants. Upon effectiveness of such registration statement, the warrants are not exercisable on cashless basis. The registration statement became effective on May 11, 2021.

 

On June 10, 2021, the Company entered into a membership interest purchase agreement for an aggregate purchase price of $350,000, to be paid in four tranches. Each tranche represents a 5% membership interest, and in aggregate a 20% membership interest. As of June 30, 2021, the Company has made an investment of $150,000 for a 10% membership interest.

 

On July 26, 2021, 52,000 incentive/ non-qualified stock options were issued to various employees and consultants. The options have a strike price of $3.88 and a ten-year term. The options shall vest in equal quarterly installments over a three-year period commencing one year after the date of grant.

   

 
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Results of Operations

 

For the Three Months Ended June 30, 2021 and June 30, 2020

 

Revenues

 

Sales increased from $660,669 for the three months ended June 30, 2020 to $1,024,410 for three months ended June 30, 2021, an increase of $363,711 or approximately 55.05%. Following the easing of COVID restrictions, the Company has seen an increase in sales in military, SATCOM, cryogenic and telecommunication markets both domestically and internationally.

 

Cost of Goods Sold and Gross Profit

 

Cost of goods sold increased from $434,711 for the three months ended June 30, 2020 to $679,787 for the three months ended June 30, 2021, an increase of $245,076 or approximately 56.38%. This increase is directly related to the increase in sales, increase in direct assembly labor and parts as well as with the hiring of a director of operations to oversee production and to help meet company growth objectives.

 

As a result, the gross profit was $344,623 for the three months ended June 30, 2021 compared to $225,988 for the three months ended June 30, 2020, an increase of $118,635 or 52.50%. Gross profit as a percentage of sales decreased slightly to 33.64% from 34.20%.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses increased to $1,043,550 for the three months ended June 30, 2021 from $442,457 for the three months ended June 30, 2020, an increase of $601,093 or approximately 135.85%. The Company experienced an increase in parent company expenses, such as stock compensation, directors’ insurance, IR/PR, consulting fees, legal fees, accounting fees and regulatory filing fees relating to the direct offering in this quarter. Additional expenses were incurred in payroll and payroll taxes, research and development efforts, sales commissions and promotion and recruiting fees.

 

Income (Loss) From Operations

 

As a result of the above, the Company has a loss from operations of $698,927 and $216,469 for the three months ended June 30, 2021 and 2020, respectively.

 

Other Income (Expenses)

 

Interest expense decreased by $20,123 or 75.09%, when comparing the three months ended June 30, 2021 to the three months ended June 30, 2020. The decrease was primarily due to the repayment of debt.

 

In addition, on April 20, 2021, the SBA approved the forgiveness of the Company’s PPP loan of $232,200.

 

Net Income

 

The Company reported a net loss of $472,695 for the three months ended June 30, 2021, compared to a net loss of $243, 268 for the three months ended June 30, 2020.

  

 
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For the Six Months Ended June 30, 2021 and June 30, 2020

 

Revenues

 

Sales increased by $80,739 or approximately 5.70%, when comparing sales for the six months ended June 30, 2021 of $1,497,386, to sales for the six months ended June 30, 2020 of $1,416,647. Our RFQ (Request for Quote) activity remains strong and as more business restrictions are lifted, this should translate to increased sales for the balance of the year.

 

Cost of Goods Sold and Gross Profit

 

Cost of goods sold increased by $146,436 or 15.39% for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. This increase is directly related to the increase in sales, increase in direct assembly labor and parts as well as with the hiring of a director of operations to oversee production and to help meet company growth objectives.

 

Gross profit decreased by $65,697 or 14.12%, when comparing the first six months of 2021 to the first six months of 2020. Gross profit percentage decreased from 32.85% to 26.69%. During the first quarter of 2021, the global pandemic and diminished economic activity that resulted from the pandemic impacted our gross profit.

 

Selling, General and Administrative Expenses

 

General and administrative expenses increased from $981,018 for the first six months of 2020 compared to $1,952,105 for the first six months of 2021, an increase of $971,087 or approximately 98.99%. The Company experienced an increase in parent company expenses, such as stock compensation, IR/PR fees, consulting fees, legal fees, accounting fees and regulatory filing fees relating to both offerings. Approximately $370,000 of expenses are non-recurring and related to the public offerings. Additional expenses were incurred in payroll and payroll taxes, research and development efforts, sales commissions and promotion and recruiting fees.

 

Income (Loss) From Operations

 

As a result of the above, the Company had a loss from operations of $1,552,500, for the six months ended June 30, 2021, compared to the loss from operations of $515,716, for the six months ended June 30, 2020, an overall increase of $1,036,784.

 

Other Income (Expenses)

 

Interest expense decreased from $50,513 for the first six months of 2020 compared to $33,034 for the first six months of 2021, a decrease of $17,479 or 34.60%. The decrease was primarily due to the repayment of debt.

 

In addition, on April 20, 2021, the SBA approved the PPP loan forgiveness of $232,200.

 

Net Income

 

The Company reported a net loss of $1,352,626 for the six months ended June 30, 2021, compared to a net loss of $566,229 for the six months ended June 30, 2020.

   

 
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Liquidity and Capital Resources

 

Operating Activities

 

The net cash used in operating activities for the six months ended June 30, 2021 was $1,620,545, resulting primarily from the net loss and the operating changes in accounts receivable, inventories, prepaid expenses and the operating lease liability.

 

Net cash used in operating activities was $266,736 for the six months ended June 30, 2020, resulting primarily from the net loss and operating changes in accounts receivable, inventory, accounts payable and accrued expenses and operating lease liability.

 

Investing Activities

 

The net cash used in investing activities for the six months ended June 30, 2021 was $1,672,502 resulting in the purchase of equipment, marketable securities and the 10% membership interest.

 

The net cash used in investing activities for the six months ended June 30, 2020 was $9,479, for the purchase of equipment.

 

Financing Activities

 

The net cash provided by financing activities for the six months ended June 30, 2021 was $30,717,908 which includes $31,900,840 million from new issuances of common stock and warrants, netted against the repayment of the line of credit and note repayment.

 

The net cash provided by financing activities for the six months ended June 30, 2020 was $134,049, a result primarily from the proceeds of the line of credit, netted against lease and notes payable.

 

We have historically financed our operations by the issuance of debt to third party lenders, equity offerings, 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, 2021, we had cash and cash equivalents of $27,624,397, a working capital of $29,821,116 and an accumulated deficit of $3,220,998.

 

As of December 31, 2020, we had cash and cash equivalents of $199,536, a working capital of $741,606 and an accumulated deficit of $1,868,372.

 

We intend to continue to finance our internal growth with cash on hand and cash provided from operations. We believe that our cash provided from 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, 2021, 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, 2020.

 

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 June 30, 2021, 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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Table of Contents

  

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.

 

On April 15, 2021, the Company agreed to issue to certain investors, in a private placement, warrants to purchase an aggregate of 1,900,500 shares of common stock at an exercise price of $8.48 per share with a five-year term. The exercise price of the warrants and the number of shares of the common stock issuable upon the exercise of the warrants will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the warrants. The warrants will be exercisable on a “cashless” basis in certain circumstances. The Company has agreed to file a prospectus supplement or registration statement on Form S-3 providing for the resale of the shares of common stock issuable upon the exercise of the warrants, at which point such warrants may no longer be exercised on a cashless basis.

 

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

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

    

 
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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: August 16, 2021

By:

/s/ Fawad Maqbool

 

 

 

Fawad Maqbool

 

 

 

President and Chief Executive Officer

(Principal Executive Officer)

 

 

Date: August 16, 2021

By:

/s/ Louisa Sanfratello

 

 

 

Louisa Sanfratello

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 
36