SEC Info - AmpliTech Group, Inc. - ‘10-Q’ for 6/30/22

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		Alternative Formats (Word, et al.) Controls and Procedures Default Upon Senior Securities Exhibits Financial Information Financial Statements (Unaudited) Item 1 Item 1A Item 2 Item 3 Item 4 Item 5 Item 6 Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Mine Safety Disclosures Other Information Part I -- Financial Information Part Ii -- Other Information Quantitative and Qualitative Disclosures About Market Risk Risk Factors Signatures Table of Contents Unregistered Sales of Equity Securities and Use of Proceeds
1	1st Page – Filing Submission
"	Table of Contents
"	Part I -- Financial Information
"	Item 1
"	Financial Statements (Unaudited)
"	Item 2
"	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Item 3
"	Quantitative and Qualitative Disclosures About Market Risk
"	Item 4
"	Controls and Procedures
"	Part Ii -- Other Information
"	Legal Proceedings
"	Item 1A
"	Risk Factors
"	Unregistered Sales of Equity Securities and Use of Proceeds
"	Default Upon Senior Securities
"	Mine Safety Disclosures
"	Item 5
"	Item 6
"	Exhibits
"	Signatures

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

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

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. i 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). i 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:

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 i ☐ No ☒

As of August 10, 2022, the registrant had i 9,629,613 shares of common stock, par value $0.001 per share, issued and outstanding.

Except as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our Company”, “the Company”, “AmpliTech”, “Specialty” or “SMW” “Spectrum” or “SSM”, “AmpliTech Group MMIC Design Center” or “AGMDC”, are the combined business of AmpliTech Group, Inc., and its consolidated subsidiary, AmpliTech, Inc. and AMPG’s divisions Specialty Microwave, Spectrum Semiconductor Materials, and AmpliTech Group MMIC Design Center.

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.

On November 19, 2021, AmpliTech Group, Inc. entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Spectrum Semiconductor Materials Inc. (the “Seller” or “SSM”), pursuant to which AmpliTech would acquire substantially all the assets of the Company (the “Acquisition”). The Acquisition was completed on December 15, 2021.

Spectrum Semiconductor Materials (“SSM”), located in Silicon Valley (San Jose, CA), is a global authorized distributor of integrated circuit (“IC”) packaging and lids for semiconductor device assembly, prototyping, testing, and production requirements.

IC packaging is the case or enclosure that contains the semiconductor device to protect it from corrosion or physical damage; the IC packaging also supports the electrical contacts, which connect the semiconductor device to a circuit board. IC packaging often gets sealed with lids, which creates an airtight seal to prevent contaminants, particles, liquids, or gases from entering the packaging to ensure the proper operation of the device. The Company offers multiple IC packaging and lids product lines according to desired product specifications, device performance, dimensions, resistances, and tolerances.

Our IC packaging and lids products serve a global customer base in a wide range of end-market applications, including aerospace, defense, industrial, medical, wireless, communications, automotive, and other growing markets. The Company is ISO 9001:2015 and AS9120B certified for the Distribution of Semiconductor Materials for the Assembly Phase of Integrated Circuit Manufacturing, as well as in compliance with the Conflict Minerals Reporting Template (“CMRT”), the European Union’s Restriction of Hazardous Substances (“RoHS”) and Registration, Evaluation, Authorization, and Restriction of Chemicals (“REACH”) directives, as well as registered with the U.S. Government’s System for Award Management (“SAM”).

The global health crisis caused by the novel coronavirus COVID-19 pandemic and its resurgences has and may continue to negatively impact global economic activity, which, despite progress in vaccination efforts, remains uncertain and cannot be predicted with confidence. In addition, variants of COVID-19, including Delta and Omicron, continue to emerge, the impact of which cannot be predicted at this time, and could depend on numerous factors, including vaccination rates among the population, the effectiveness of the COVID-19 vaccines against COVID-19 variants along with the response by governmental bodies and regulators. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the COVID-19 pandemic on our business. Many countries around the world have continued to impose quarantines and restrictions on travel and mass gatherings to slow the spread of the virus. Accordingly, our ability to continue to operate our business may also be limited. Such events may result in a period of business, supply and manufacturing disruptions, and in reduced operations, any of which could materially affect our business, financial condition and results of operations. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. We continue to monitor the impacts of COVID-19 on the global economy and on our business operations. Although we expect the vaccinations for COVID-19 will continue to improve conditions, the ultimate impact from COVID-19 on our business operations and financial results will depend on, among other things, the ultimate severity and scope of the pandemic, including the new variants of the virus, the pace at which governmental and private travel restrictions and public concerns about public gatherings will ease, the rate at which historically large increases in unemployment rates will decrease, if at all, and whether, and the speed with which, the economy recovers. We are not able to fully quantify the impact that these factors will have on our business, but developments related to COVID-19 may materially affect financial condition and results of operations in future periods.

The results of operations for the six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022. 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, 2021 and 2020 included in Form 10-K filed with the SEC filed on March 31, 2022.

The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses. Therefore, management does not believe significant credit risks exist at June 30, 2022.

The Purchase Agreement contains representations, warranties, and covenants believed to be customary for a transaction of this nature, including covenants as to indemnification for breaches of certain representations, warranties and covenants, subject to certain exclusions and caps. Further, the completion of the Acquisition is subject to release of all liens and to the satisfaction of closing conditions, including the continued employment of certain Company employees.

The fair value of the purchase consideration issued to Spectrum Semiconductor Materials was allocated to the net tangible assets acquired. The Company accounted for the Acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $ i 4,098,516. The excess of the aggregate fair value of the net tangible assets has been allocated to net intangible assets of $ i 7,389,794.

The following table summarizes the allocation of the purchase price of the acquisition:

The following table summarizes the Company’s consolidated results of operations, as well as unaudited proforma consolidated results of operations as though the acquisition had occurred on January 1, 2021:

The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the Acquisition been completed as of January 1, 2021 or to project potential operating results as of any future date or for any future periods.

i The Company entered into several 60-month lease agreements to finance certain laboratory and office equipment. As such, the Company has accounted for these transactions as a finance lease.

The following table reconciles future minimum finance lease payments to the discounted lease liability as of June 30, 2022:

On December 4, 2015, i 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. The lease was terminated in April 2022.

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 $ i 90,000 and i 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 $ i 1,200,000 and then at fair market value for the remainder of the lease term. This option has expired and was not exercised as of June 30, 2022.

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

On December 15, 2021, the Company assumed the SSM lease agreement for office and warehouse space in San Jose, CA, with the same terms and conditions. Effective February 1, 2020, the lease term will expire on January 31, 2025 with a base rent of $ i 24,234 for the first 12 months and increase by approximately i 3% every year.

On October 15, 2021, the Company entered into a new lease for a i 20,000 square foot facility at 155 Plant Avenue, Hauppauge, New York, for a term of seven years and two months. The yearly base rent of $ i 346,242 shall increase at a rate of i 2.75% per year to begin on the first anniversary lease commencement date and each year thereafter. The first two months of basic rent shall be abated following the commencement lease date. In the event the landlord decides to sell the property, the Company shall have the right of first offer to purchase subject property. Upon lease execution, the Company paid two months of base rent as a security deposit and one month’s rent totaling $ i 86,560. The Company moved into the new manufacturing and headquarters facility April 1, 2022.

The following table reconciles future minimum operating lease payments to the discounted lease liability as of June 30, 2022:

On September 12, 2019, the Company was approved for a $ i 250,000 equipment leasing facility which was subsequently increased to $ i 500,000. The Company has borrowed against the leasing facility as follows:

In January 2022, the Company purchased machinery for $ i 91,795, applying a deposit of $ i 9,180 and financing the balance of $ i 82,616 over i 24 payments at an interest rate of i 1.90%. The balance as of June 30, 2022 was $ i 62,255. Principal payments of $ i 20,361 and interest expense of $ i 704 was paid for the six months ended June 30, 2022.

Future principal payments over the term of the loans as of June 30, 2022 are as follows:

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 i 500,000 shares of Preferred Stock, par value $ i 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 i 1,000,000 shares, $ i 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 i 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.

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

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, i 1,371,428 units at an offering price of $ i 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 $ i 8,119,502.

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

As of December 31, 2021, i 210,700 warrants were exercised at an exercise price of $ i 7.00 and i 210,700 shares of common stock were issued. Gross proceeds received were $ i 1,474,900.

On April 15, 2021, the Company entered into definitive agreements with certain institutional investors for the sale of i 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 i 1,900,500 shares of common stock at an exercise price of $ i 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 $ i 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.

On December 15, 2021, i 188,442 unregistered shares of AmpliTech’s common stock were issued as part of the Spectrum Semiconductor Materials acquisition for $ i 665,200.

On May 20, 2022, i 30,000 restricted stock units at an exercise price of $ i 1.96 were issued to a board advisor. Vesting will occur in equal quarterly installments of i 2,500 shares beginning on May 20, 2022. On May 20, 2022, i 2,500 shares of common stock were issued.

On June 17, 2022, i 15,000 restricted stock units at an exercise price of $ i 1.97 were issued to three board members. Vesting occurred immediately and i 45,000 shares of common stock were issued.

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 i 1,250,000 shares of common stock to grant shares of the Company’s common stock 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.

Below is a table summarizing the changes in stock options outstanding for the six months ended June 30, 2022:

As of June 30, 2022, all outstanding stock options were issued according to the Company’s 2020 Plan, and there remains i 635,000 shares of common stock available for future issuance under the 2020 Plan.

Stock-based compensation expense related to stock options of $ i 142,491 and $ i 119,442 was recorded for the six and three months ended June 30, 2022. As of June 30, 2022, the remaining unrecognized compensation cost related to non-vested stock options is $ i 502,215 and is expected to be recognized over i 4.71 years. The outstanding stock options have a weighted average remaining contractual life of i 5.05 years and a total intrinsic value of $ i 30,000.

Below is a table summarizing the changes in warrants outstanding for the six months ended June 30, 2022:

Stock-based compensation expense related to warrants of $ i 44,037 and $ i 22,140 was recorded for the six and three months ended June 30, 2022. As of June 30, 2022, the remaining unrecognized compensation cost related to non-vested warrants is $ i 4,865. The outstanding warrants have a weighted average remaining contractual life of i 5.81 years and a total intrinsic value of $ i 0.

Below is a table summarizing the changes in restricted stock units outstanding for the six months ended June 30, 2022:

Stock-based compensation expense related to restricted stock units of $ i 95,745 was recorded for the six months ended June 30, 2022. As of June 30, 2022, the remaining unrecognized compensation cost related to non-vested restricted stock units is $ i 51,705. The outstanding warrants have a weighted average remaining contractual life of i 2.65 years and a total intrinsic value of $ i 0.

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.

AmpliTech Group Inc. (“AMPG,” “AmpliTech” or the “Company”), incorporated in 2010 in the state of Nevada, is the parent company of its subsidiary AmpliTech, Inc., and AMPG’s divisions Specialty Microwave, Spectrum Semiconductor Materials, and AmpliTech Group MMIC Design Center (“AGMDC”).

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 (“LNA”), medium power amplifiers, cryogenic amplifiers, and custom assembly designs for the global satellite communications, telecom (5G & IoT), space, defense, and quantum computing 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. We have both domestic and international customers in such industries as aerospace, governmental, defense and commercial satellite.

Specialty Microwave designs and manufactures state-of- the-art precision SATCOM microwave components, RF subsystems and specialized electronic assemblies for the military and commercial markets, flexible and rugged waveguides, wave guide adapters and more.

AGMDC designs, develops and manufactures state-of-the-art signal processing components for satellite and 5G communications networks, defense, space and other commercial applications, allowing the Company to market its products to wider base of customers requiring high technology in smaller packages.

On November 19, 2021, AMPG entered into an Asset Purchase Agreement with Spectrum Semiconductor Materials Inc. (“SSM”), a globally authorized distributor of integrated circuit (IC) packaging and lids for semiconductor device assembly, prototyping, testing, and production requirements founded in 1990 and headquartered in San Jose, CA, pursuant to which AMPG acquired substantially all of the assets of the Company (the Acquisition). The Acquisition was completed on December 15, 2021.

In 2021, the Company opened a monolithic microwave integrated circuits (“MMIC”) chip design center in Texas and has started to implement several of its proprietary amplifier designs into MMIC components. MMICs are semiconductor chips used in high-frequency communications applications. MMICs are widely desired for power amplification solutions to service emerging technologies, such as phased array antennas and quantum computing. MMICs carry a smaller footprint enabling them to be incorporated into a broader array of systems while reducing costs.

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

The Company’s research and development initiative to expand its product line of low noise amplifiers to include its new 5G and wireless infrastructure products and MMIC designs is progressing significantly. Our combined engineering and manufacturing resources are expected to complement the development of new subsystems for satellite, wireless, and 5G infrastructures, as well as advanced military and commercial markets.

Our principal executive offices are located at 155 Plant Avenue, Hauppauge, NY 11788. Our telephone number is (631) 521-7831. Our corporate website is www.amplitechinc.com. The information on our website is not a part of, or incorporated in, this prospectus.

Sales increased from $1,024,410 for the three months ended June 30, 2021 to $4,584,042 for the three months ended June 30, 2022, an increase of $3,559,632 or approximately 347.48%. Sales increased primarily due to the acquisition of Spectrum Microwave, whose sales for this quarter totaled $3,147,748. Sales increased as well for the three-month period by $411,885 or 40.21%. With the introduction of disruptive technology in the telecommunication market, the demand for RF amplifiers has increased.

Cost of Goods Sold increased from $679,787 for the three months ended June 30, 2021 to $2,546,323 for the three months ended June 30, 2022, an increase of $1,866,536 or approximately 274.58%. This increase is directly related to approximately $1,706,306 of additional expense included in cost of goods sold as part of the SSM acquisition, additional hiring of direct labor and an increase in outsourcing as a result of the increase in sales. As a result, the gross profit was $2,037,719 for the three months ended June 30, 2022 compared to $344,623 for the three months ended June 30, 2021, an increase of $1,693,096 or 491.29%. Additionally, as a result of the acquisition and the increase in LNA and RF subsystems sales, gross profit as a percentage of sales increased to 44.45% from 33.64%.

Selling, general and administrative expenses increased to $2,221,785 for the three months ended June 30, 2022 from $987,818 for the first three months ended June 30, 2021, an increase of $1,223,967 or approximately 124.92%. With the acquisition of Spectrum, selling, general and administrative expenses increased by $707,714. Other expenses such as salaries, employee benefits, accounting fees, D&O insurance, stock compensation, trade show expenses and business development expenses have increased as well. With the relocation to the new facility, we incurred moving expenses along with the increase in rent expense.

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 three months ended June 30, 2022 and 2021 were $175,836 and $55,732, respectively.

The increase in research and development of $120,104 or 215.50% is primarily due to the Company implementing its research and development into the next generation of 5G/6G subsystems for cellular and satellite communications. The Company is in the process of designing and developing antennas and subsystems that will be an integral part of the GPS and 5G infrastructure. These subsystems will enable high-speed, high capacity 5G/6G networks that will be installed into infrastructure for retrofitting and improving connectivity for cellphones, satellites and many other everyday applications.

In addition, AGMDC, the MMIC chip design center in Texas has started to implement several of its proprietary amplifier designs into MMIC components. MMICs are semiconductor chips used in high-frequency communications applications and are widely desired for power amplification solutions to service emerging technologies such as phased array antennas and quantum computing.

As a result of the above, the Company reported a loss from operations of $359,902 and $698,927 for the three months ended June 30, 2022 and 2021, respectively.

Interest expense increased by $2,998 or 45.15%, when comparing the three months ended June 30, 2022 to the three months ended June 30, 2021. The increase was primarily due to additional borrowing for the purchase of research and development equipment.

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

The Company reported a loss of $369,540 and $472,695 for the three months ended June 30, 2022, and 2021, respectively.

Sales increased by $8,186,176 or approximately 546.70%, when comparing sales for the six months ended June 30, 2021 of $1,497,386, to sales for the six months ended June 30, 2022 of $9,683,562. Sales increased primarily due to the acquisition of Spectrum Microwave, whose sales for the six months ended June 30, 2022 was $7,179,113. Amplifier and RF subsystems sales increased by $1,007,064 or 67.25%. With the introduction of disruptive technology in the telecommunication market, the demand for RF amplifiers has increased.

Cost of goods sold increased by $4,224,464 or 384.82% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021. This increase is directly related to the acquisition of Spectrum Microwave, additional hiring of direct labor and the increase in outsourcing because of the increase in sales.

Gross profit increased by $3,961,712 or 991.41%, when comparing the first six months of 2021 to the first six months of 2022. Overall, gross profit percentage increased from 26.69% to 45.04% as a result of the acquisition, with amplifier and RF system’s gross profit increasing by 155.28%.

General and administrative expenses increased from $1,889,143 for the first six months of 2021 compared to $4,123,095 for the first six months of 2022, an increase of $2,233,952 or approximately 118.25%. With the acquisition of Spectrum, selling, general and administrative expenses increased by $1,529,511. The Company experienced an increase in parent company expenses, such as stock compensation, IR/PR fees, accounting fees and DO insurance. Approximately $140,000 of expense was related to the trade shows that the Company attended in Denver and Washington DC.

With the relocation to the new facility, we incurred moving expenses of $43,040, along with the increase in rent expense.

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, 2022 and 2021 were $589,139 and $62,962, respectively.

The increase in research and development of $526,177 is a result of the Company implementing its research and development into the next generation of 5G/6G subsystems for cellular and satellite communications. The Company is in the process of designing and developing antennas and subsystems that will be an integral part of the GPS and 5G infrastructure. These subsystems will enable high-speed, high capacity 5G/6G networks that will be installed into infrastructure for retrofitting and improving connectivity for cellphones, satellites and many other everyday applications. In addition, AGMDC, the MMIC chip design center in Texas has started to implement several of its proprietary amplifier designs into MMIC components. MMICs are semiconductor chips used in high-frequency communications applications and are widely desired for power amplification solutions to service emerging technologies such as phased array antennas and quantum computing.

As a result of the above, the Company reported a loss from operations of $350,917 for the six months ended June 30, 2022, compared to the loss from operations of $1,552,500 for the six months ended June 30, 2021, an overall decrease of $1,201,583.

Interest expense decreased from $32,998 for the first six months of 2021 compared to $14,998 for the first six months of 2022, a decrease of $18,000 or 54.55%. 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.

The Company reported a net loss of $365,915 for the six months ended June 30, 2022, compared to a net loss of $1,352,626 for the six months ended June 30, 2021.

The net cash used in operating activities for the six months ended June 30, 2022 was $3,182,296 resulting primarily from the net loss and operating changes in accounts receivable, inventories, accounts payable and accrued expenses and operating lease liability.

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.

The net cash used in investing activities for the six months ended June 30, 2022 was $348,730, of which $250,480 related to the purchase of equipment and $98,250 for our investment in SN2N.

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 a 10% membership interest.

The net cash used in financing activities for the six months ended June 30, 2022 was $126,294, a result primarily from the repayments of notes payable and finance lease.

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, notes payable and finance lease payments.

We have historically financed our operations by the issuance of debt from 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, 2022, we had cash and cash equivalents of $14,361,554, a working capital of $20,189,661 and an accumulated deficit of $6,993,092.

As of December 31, 2021, we had cash and cash equivalents of $18,018,874, a working capital of $20,467,429 and an accumulated deficit of $6,627,177.

We intend to continue to finance our internal growth with cash on hand, cash provided from operations, borrowings, debt or equity offerings, or some combination thereof. We believe that our cash provided from operations and cash on hand will provide enough working capital to fund our operations for the next twelve months.

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, 2022, 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, 2021.

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.

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

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, 2022, 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.

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.

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.

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

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.

	June 30,			December 31,
	2022			2021
	(Unaudited)
Assets
Current Assets
Cash and cash equivalents	$	i 14,361,554		$	i 18,018,874
Accounts receivable, net		i 2,523,698			i 1,659,878
Other Receivable		i 10,526			i 201,215
Inventories, net		i 5,703,176			i 4,192,812
Prepaid expenses		i 600,196			i 210,028
Total Current Assets		i 23,199,150			i 24,282,807

Property and equipment, net		i 1,708,812			i 1,355,288
Right of use operating lease assets		i 4,494,806			i 1,115,588
Intangible assets, net		i 3,209,263			i 3,284,082
Goodwill		i 4,817,019			i 4,817,019
Investment		i 348,250			i 250,000
Security deposits		i 121,217			i 122,404

Total Assets	$	i 37,898,517		$	i 35,227,188

Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses	$	i 1,733,177		$	i 3,006,334
Customer deposits		i 362,544			i 253,909
Current portion of financing obligations		i 50,149			i 33,688
Current portion of operating obligations		i 565,372			i 391,571
Current portion of notes payable		i 298,247			i 129,876
Total Current Liabilities		i 3,009,489			i 3,815,378

Long Term Liabilities
Finance lease, net of current obligations		i 57,438			i 17,471
Operating lease, net of current obligations		i 4,066,697			i 795,317
Notes payable, net of current portion		i 450,004			i 200,491
Revenue earnout		i 1,365,038			i 1,365,038
Total Liabilities		i 8,948,666			i 6,193,695

Commitments and Contingencies		i -			i -

Stockholders' Equity
Series A convertible preferred stock, par value $ i 0.001, i 1,000,000 shares authorized, i 0 shares issued and outstanding
Common Stock, par value $ i 0.001, i 500,000,000 shares authorized, i 9,629,613 and i 9,582,113 shares issued and outstanding, respectively		i 9,630			i 9,582
Additional paid-in capital		i 35,933,313			i 35,651,088
Accumulated deficit		( i 6,993,092	)		( i 6,627,177	)
Total Stockholders' Equity		i 28,949,851			i 29,033,493
Total Liabilities and Stockholders' Equity	$	i 37,898,517		$	i 35,227,188

	For The Six Months Ended
	June 30,			June 30,
	2022			2021
Cash Flows from Operating Activities:
Net loss	$	( i 365,915	)	$	( i 1,352,626	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		i 180,280			i 50,114
Amortization of prepaid consulting		i -			i 134,778
Amortization of right-of-use operating lease asset		i 233,930			i 46,789
Stock based compensation		i 282,273			i 188,550
Loss on disposal of property and equipment		i 1,606			i -
Gain on forgiveness of debt		i -			( i 232,200	)
Change in fair value of marketable securities		i -			( i 672	)
Changes in Operating Assets and Liabilities:
Accounts receivable		( i 863,820	)		( i 243,624	)
Other receivable		i 190,689			i -
Inventories		( i 1,510,364	)		( i 288,886	)
Prepaid expenses		i 327			( i 196,498	)
Security deposits		i 1,187			i -
Accounts payable and accrued expenses		( i 1,273,157	)		i 206,715
Operating lease liability		( i 167,967	)		( i 45,765	)
Customer deposits		i 108,635			i 112,780
Net cash used in operating activities		( i 3,182,296	)		( i 1,620,545	)

Cash Flows from Investing Activities:
Purchase of equipment		( i 250,480	)		( i 413,536	)
Purchase of marketable securities, net		i -			( i 1,108,966	)
Investment		( i 98,250	)		( i 150,000	)
Net cash used in investing activities		( i 348,730	)		( i 1,672,502	)

Cash Flows from Financing Activities:
Proceeds received from private placement, net of expenses		i -			i 20,976,344
Proceeds received from public offering, net of expenses		i -			i 9,449,597
Proceeds received from exercise of warrants		i -			i 1,474,899
Proceeds (Repayment) of line of credit, net		i -			( i 200,000	)
Repayments on finance lease		( i 20,424	)		( i 15,846	)
Proceeds (Repayment) of notes payable, net		( i 105,870	)		( i 967,086	)
Net cash (used in) provided by financing activities		( i 126,294	)		i 30,717,908

Net change in cash and cash equivalents		( i 3,657,320	)		i 27,424,861

Cash and Cash Equivalents, Beginning of Period		i 18,018,874			i 199,536

Cash and Cash Equivalents, End of Period	$	i 14,361,554		$	i 27,624,397

Supplemental disclosures:
Cash paid for interest expense	$	i 12,530		$	i 38,400
Cash paid for income taxes	$	i -		$	i -

Non-Cash Investing and Financing Activities:
Common Stock issued on vesting of RSUs	$	i 48		$	i -
Finance agreement entered in exchange for prepaid assets	$	i 441,139		$	i 32,222
Equipment received for prepaid assets	$	i 50,644		$	i -
Operating lease right-of-use asset and liability initial measurement	$	i 3,626,985		$	i -
Financed purchases of property and equipment	$	i 145,630		$	i -
Loss on disposal of property and equipment	$	i 1,606		$	i -

Description	Useful Life	Method
Office equipment	i 7 years	i Straight-line
Machinery/shop equipment	i 5 to 10 years	i Straight-line
Computer equipment/software	i 1 to 7 years	i Straight-line
Vehicles	i 5 years	i Straight-line

Spectrum	For the three months ended June 30, 2022		For the six months ended June 30, 2022
Domestic sales	$	i 1,640,753	$	i 3,236,379
International sales		i 1,506,995		i 3,942,734
Total sales	$	i 3,147,748	$	i 7,179,113

Purchase consideration at fair value:
Cash	$	i 8,000,000
Common stock		i 665,200
Net working capital adjustment		i 708,076
Indemnification escrow amount		i 750,000
Fair value of revenue earnout		i 1,365,038
Total purchase price	$	i 11,488,314

Allocation of purchase price:
Working Capital	$	i 3,730,133
Property and Equipment		i 99,188
Goodwill		i 4,696,883
Tradename		i 514,284
Customer relationships		i 2,178,631
Right of Use operating lease asset		i 858,508
Right of Use operating lease liability		( i 619,271	)
Other asset		i 29,958
Net assets acquired	$	i 11,488,314

AmpliTech Group, Inc. – ‘10-Q’ for 6/30/22

On: Monday, 8/15/22, at 9:00am ET · For: 6/30/22 · Accession #: 1477932-22-6008 · File #: 1-40069

Previous ‘10-Q’: ‘10-Q’ on 5/16/22 for 3/31/22 · Next: ‘10-Q’ on 11/14/22 for 9/30/22 · Latest: ‘10-Q’ on 11/14/23 for 9/30/23

Quarterly Report — Form 10-Q

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‘10-Q’ — Quarterly Report

Document Table of Contents

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Dates Referenced Herein and Documents Incorporated by Reference

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		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		35

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		41

Item 4.	Controls and Procedures		42

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings		43

Item 1A.	Risk Factors		43

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		43

Item 3.	Default Upon Senior Securities		43

Item 4.	Mine Safety Disclosures		43

Item 5.	Other Information		43

Item 6.	Exhibits		44

SIGNATURES			45

	For the six months ended
	June 30, 2021
	As Reported			Pro Forma

Net sales	$	i 1,497,386		$	i 8,331,908
Net income(loss) attributable to common shareholders		( i 1,352,626	)		i 400,862
Earnings per common share, basic and diluted:
Basic	$	( i 0.19	)	$	i 0.04
Diluted	$	( i 0.19	)	$	i 0.04

	June 30, 2022			December 31, 2021

Raw Materials	$	i 868,110		$	i 609,841
Work-in Progress		i 377,376			i 162,072
Finished Goods		i 5,571,690			i 4,452,885
Subtotal	$	i 6,817,176		$	i 5,224,798
Less: Reserve for Obsolescence		( i 1,114,000	)		( i 1,031,986	)

Total	$	i 5,703,176		$	i 4,192,812

	June 30, 2022			December 31, 2021
Lab Equipment	$	i 2,016,812		$	i 1,893,564
Manufacturing Equipment		i 117,095			i 25,000
Automobiles		i 7,335			i 7,335
Computer Equipment and Software		i 203,410			i 159,315
Leasehold Improvements		i 69,402			i -
Furniture and Fixtures		i 143,894			i 27,504
Subtotal		i 2,557,948			i 2,112,718
Less: Accumulated Depreciation		( i 849,136	)		( i 757,430	)
Total	$	i 1,708,812		$	i 1,355,288

2022		i 75,157
2023		i 149,976
2024		i 149,976
2025		i 149,976
2026		i 149,976
Thereafter		i 1,949,685
	$	i 2,624,746

Operating leases	June 30, 2022

Assets
ROU operating lease assets	$	i 4,494,806

Liabilities
Current portion of operating lease	$	i 565,372
Operating lease, net of current portion		i 4,066,697
Total operating lease liabilities	$	i 4,632,069

Finance leases
Assets
Property and equipment, gross	$	i 234,036
Accumulated depreciation		( i 93,634	)
Property and equipment, net	$	i 140,402

Liabilities
Current portion of financing lease	$	i 50,149
Finance lease, net of current portion		i 57,438
Total operating lease liabilities	$	i 107,587

Weighted average remaining lease term (years)	June 30, 2022
Operating leases		i 9.8
Finance leases		i 3.1

Weighted average discount rate
Operating leases		i 4.48	%
Finance leases		i 4.71	%

2022		i 29,098
2023		i 36,482
2024		i 18,761
2025		i 18,196
2026		i 11,982
Thereafter		i 1,998
Total lease payments		i 116,517
Less imputed interest		( i 8,930	)
Total lease obligations		i 107,587
Less current obligations		( i 50,149	)
Long-term lease obligations	$	i 57,438

2022		i 377,096
2023		i 768,465
2024		i 765,075
2025		i 400,321
2026		i 383,347
Thereafter		i 3,112,071
Total lease payments		i 5,806,375
Less imputed interest		( i 1,174,306	)
Total lease obligations		i 4,632,069
Less current obligations		( i 565,372	)
Long-term lease obligations	$	i 4,066,697

	·	On December 20, 2019, the Company borrowed $ i 58,192 to be paid over a three-year term with monthly payments of $ i 1,736 at an interest rate of i 5.26%. The balance as of June 30, 2022 was $ i 8,573. Principal payments of $ i 10,057 and interest expense of $ i 359 was paid for the six months ended June 30, 2022.
	·	On May 14, 2020, the Company borrowed $ i 27,494 to be paid over a three-year term with monthly payments of $ i 815 at an interest rate of i 4.268%. The balance as of June 30, 2022 was $ i 7,984. Principal payments of $ i 4,648 and interest expense of $ i 242 was paid for the six months ended June 30, 2022.
	·	On June 10, 2020, the Company borrowed $ i 41,015 to be paid over a three-year term with monthly payments of $ i 1,216 at an interest rate of i 4.278%. The balance as of June 30, 2022 was $ i 13,078. Principal payments of $ i 6,908 and interest expense of $ i 388 was paid for the six months ended June 30, 2022.
	·	On May 6, 2022, the Company borrowed $ i 441,139 to be paid over a three-year term with monthly payments of $ i 13,341 at an interest rate of i 5.6%. The balance as of June 30, 2022 was $ i 416,572. Principal payments of $ i 24,567 and interest expense of $ i 2,115 was paid for the six months ended June 30, 2022.

	Payments
2022	$	i 158,017
2023		i 295,889
2024		i 241,633
2025		i 52,712
Total remaining payments	$	i 748,251

			Weighted Average
	Number of		Exercise
	Options		Price ($)
Outstanding at December 31, 2021		i 305,500	$	i 3.74
Granted		i 282,000		i 1.79
Exercised		-		-
Expired		-		-
Outstanding at June 30, 2022		i 587,500	$	i 2.80
Exercisable at June 30, 2022		i 587,500	$	i 3.45

*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

	AmpliTech Group, Inc.

Date: August 15, 2022	By:	/s/ *Fawad Maqbool*
		Fawad Maqbool
		President and Chief Executive Officer (Principal Executive Officer)

This ‘10-Q’ Filing	Date	Other Filings

	1/31/25
	10/1/24
	3/31/23
	12/31/22
	12/15/22
	11/1/22
Filed on:	8/15/22
	8/10/22
	8/4/22
For Period end:	6/30/22	POS AM
	6/17/22	4
	6/15/22	4
	5/20/22
	5/6/22
	5/5/22
	4/1/22
	3/31/22	10-K, 10-Q
	1/1/22
	12/31/21	10-K
	12/15/21	8-K, 8-K/A
	11/20/21
	11/19/21	8-K
	10/15/21
	6/30/21	10-Q, 4
	6/10/21
	5/11/21	EFFECT
	4/30/21	S-3
	4/20/21
	4/16/21	4, 424B5, 8-K
	4/15/21	424B5, 8-K, EFFECT
	4/14/21	8-K, EFFECT
	4/1/21	S-3
	3/31/21	10-K, 10-Q
	2/24/21
	2/17/21	EFFECT
	2/1/21
	1/13/21
	1/1/21
	12/31/20	10-K, SD
	12/14/20	S-8
	10/7/20
	6/10/20
	5/14/20
	2/1/20
	12/20/19
	11/27/19
	11/1/19
	9/12/19	8-K, 8-K/A
	2/1/16
	12/4/15
	5/20/14
	7/10/13
	8/13/12	3, 8-K, NT 10-Q, S-1
	12/30/10
		List all Filings