UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

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

 

For The Fiscal Year Ended December 31, 2017

 

or

 

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

 

Commission File No. 000-54355

 

AmpliTech Group, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

 

27-4566352

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

620 Johnson Avenue

Bohemia, NY 11716

 

11716

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (631) 521-7831

 

Securities registered pursuant to Section 12(b) of the Exchange Act: None.

 

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

 

Common stock, par value $0.001 per share.

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

 

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

 

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

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

o

Accelerated filer

o

Non-accelerated filer

o

Smaller reporting company

x

(Do not check if a smaller reporting company)

 

 

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

 

The aggregate market value of the registrant’s common stock, par value $0.001 per share, held by non-affiliates of the registrant, based on the closing price of the common stock as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $1,883,828.

 

As of March 30, 2018, the registrant had 46,636,326 shares of common stock issued and outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE :

 

None.

 

 
 
 
 

 

AMPLITECH GROUP, INC.

 

ANNUAL REPORT ON FORM 10-K

 

TABLE OF CONTENTS

 

 

Page

 

PART I

 

ITEM 1.

Business

4

 

ITEM 1A.

Risk Factors

8

 

ITEM 1B.

Unresolved Staff Comments

8

 

ITEM 2.

Properties

8

 

ITEM 3.

Legal Proceedings

8

 

ITEM 4.

Mine Safety Disclosures

8

 

PART II

 

 

 

 

 

 

ITEM 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

9

 

ITEM 6.

Selected Financial Data

9

 

ITEM 7.

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

10

 

ITEM 7A.

Quantitative and Qualitative Disclosures About Market Risk

13

 

ITEM 8.

Financial Statements and Supplementary Data

F-1

 

ITEM 9.

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

14

 

ITEM 9A.

Controls and Procedures

14

 

ITEM 9B.

Other Information

14

 

PART III

 

 

 

 

 

 

ITEM 10.

Directors, Executive Officers and Corporate Governance

15

 

ITEM 11.

Executive Compensation

16

 

ITEM 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

17

 

ITEM 13.

Certain Relationships and Related Transactions, and Director Independence

18

 

ITEM 14.

Principal Accountant Fees and Services

18

 

PART IV

 

 

 

 

 

ITEM 15.

Exhibits and Financial Statement Schedules

20

 

Signatures

21

 

 
2
 
 

 

Use of Certain Defined Terms

 

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

 

Forward-Looking Statements

 

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

 

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

 

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Annual Report on Form 10-K. All subsequent written and oral forward-looking statements concerning other matters addressed in this Annual Report on Form 10-K 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 Annual Report on Form 10-K.

 

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

 

 
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PART I

 

ITEM 1. BUSINESS

 

Business Overview

 

We design, engineer and assemble micro-wave component based amplifiers that meet individual customer specifications. Our products consists of RF amplifiers and related subsystems, operating at multiple frequencies from 50kHz to 44GHz, including Low Noise Amplifiers, Medium Power Amplifiers, oscillators, filters, and custom assembly designs. We also offer non-recurring engineering services on a project-by-project basis, for a predetermined fixed contractual amount, or on a time plus material basis.

 

Our Corporate History and Background

 

AmpliTech Group Inc. (“AmpliTech” or “the Company”) was incorporated under the laws of the State of Nevada on December 30, 2010. On August 13, 2012, the Company acquired AmpliTech Inc., by issuing 16,675,000 shares of the Company’s Common Stock to the shareholders of Amplitech Inc. in exchange for 100% of the outstanding shares of AmpliTech Inc. (“the Share Exchange”). After the Share Exchange, the selling shareholders owned 1,200,000 shares of the outstanding 17,785,000 shares of Company common stock, resulting in a change in control. Accordingly, the transaction was accounted for as a reverse acquisition in which AmpliTech, Inc. was deemed to be the accounting acquirer, and the operations of the Company were consolidated for accounting purposes. The capital balances have been retroactively adjusted to reflect the reverse acquisition.

 

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

 

Our Products

 

Our products consist of RF amplifiers and related subsystems, operating at multiple frequencies from 50kHz to 44GHz, including Low Noise Amplifiers, Medium Power Amplifiers, oscillators, filters, and custom assembly designs.

 

New to our list of products is the 18 to 40 GHz wide band low noise amplifier. It is designed mainly for wideband telecommunications such as military and space applications, point to point radios as well as test equipment.

 

AmpliTech has also introduced a new line of cryogenic amplifiers designed to operate at temperatures as low as 4K that offer much lower Noise Figures than our standard models and some of the lowest Noise Figures in the industry. Consuming as little DC power as +0.5V DC@8mA, the light-weight, compact housings provide excellent performance while generating very little heat. These amplifiers are very useful for applications that require the absolute minimum amounts of noise injection for the growing market of Low Temperature Applications, such as Quantum Computing, Medical Applications, RF Imaging, Research & Development, Space Communications, Accelerators, Radiometry and Telephony.

 

Low Noise Amplifiers

 

Low Noise Amplifiers, or LNAs, are amplifiers used in receivers of almost every type of communication system (Wi-Fi, Radar, Satellite, Base station, Cell phone, Radio, etc.) to improve signal strength and increase sensitivity and range of receivers.

 

Medium Power Amplifiers

 

Medium Power Amplifers, or MPAs, provide increased output power and gain in transceiver chains to increase signal power and maintain dynamic range and linearity in Radars, Base-stations, Wireless networks, and almost every communication system.

 

Oscillators

 

Phase Locked Oscillators, or PLOs, and Dielectric Resonator Oscillators, or DROs, are ultra-stable frequency sources and references in transceiver applications that complement the amplifier chain in the transceivers.

 

Filters

 

Filters discriminate or block out certain frequencies in communication systems to improve dynamic range and NF response. Our filters are low loss and used on the front-end of the receiver chain that provide low degradation in the NF of the system, thereby maintaining and enhancing the signal clarity.

 

Our Technology

 

Our products are supported by hybrid design topologies that create highly linear Radio Frequency (RF) products that amplify and transform signals with minimal addition of noise, achieving high Signal to Noise Ratio (SNR) and increased receiver sensitivity and range, at a low cost and low power consumption. Our hybrid design topologies include:

 

 

·

Discrete Microwave Integrated Circuit (MIC)

 

·

Pseudomorphic High Electron Mobility Transistor (PHEMT)

 

·  

MIC and Low Noise MIC

 

 
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The discrete topology that we utilize provides various advantages:

 

 

·  

Can easily optimize Voltage Standing Wave Ratio (VSWR) and Noise Figure

 

·

Flexibility of design; can easily adapt to change of specs, technology, etc.

 

·

Low DC power consumption

 

·

Can control and optimize and gain flatness due to discrete gain stages

 

·  

Optimum use of MIC technology and experience

 

·

Use of negative bias is not necessary

 

·

Better part availability

 

Our research and development activities are conducted on new product designs to the extent as requested by the customers. The cost of our research and development activities is incorporated into the unit selling prices and, as such, is borne directly by the customers. For the years ending December 31, 2017 and 2016, the Company has incurred research and development costs of $68,447and $35,369, respectively.

 

Industry and Competition

 

Market Overview

 

We operate our business in the industry of high power Radio Frequency (RF) semiconductor. We believe that the RF semiconductor industry has the following features:

 

High demand for complex, next-generation Wireless signal processing applications;

 

 

·

Mass adoption of Internet and Web-based applications, and other high-band width applications

 

·

Ability to combine analog and digital signal processing into more integrated RF solutions

 

·

Wide spread application of low-cost, high-performance and functionality wireless networks

 

·

Emergence of 4G,WiMAX, satellite and advanced wireless network infrastructure roll-outs

 

Growing opportunity for advanced RF subsystems, modules and components;

 

 

·

Demand for precise, high-speed signal conditioning interfaces between analog and digital

 

·

Combining analog/digital signal processing capabilities into more highly-integrated solutions

 

·

Wide spread application of low-cost, high-performance wireless network systems

 

·

Convergence of computing, communications, and consumer electronics with state-of-the-art signal processing capability with less power consumption

 

Complements OEM design, and manufacturing capabilities;

 

 

·

Deliver high quality and feature improvements that service provider require

 

·

Lower production costs and shorten product development cycles

 

·

Adhere to flexibility, performance, streamlined procurement processes and value requirements

 

Competition

 

The markets for the products that we offer are very competitive, are rapidly evolving. Competition may increase in the future, which could require us to reduce prices, increase advertising expenditures or take other actions that may have an adverse effect on our operating results. We believe that we will enjoy the following competitive advantages:

 

 

·

Experienced team

 

·

Superior performance products

 

·

Proven mature reliable technology

 

·

Competitive pricing

 

·

Good deliveries

 

 
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Our Strategy

 

Our objective is to become a premier designer, manufacturer and distributor of high quality and state-of-the-art cryogenic microwave amplifiers, RF designs and applications for Wireless Networks and the future of Wireless Communication. Key elements of our strategy include the following:

 

 

·

Reorganization to become a reporting company to improve access to capital resources

 

·

New product development

 

·

Commercializing of existing core technology into specific high volume technology sectors and obtaining patent on such technology

 

Manufacturing

 

Our manufacturing facility is located at our corporate office in Bohemia, New York. Our manufacturing process involves the assembly of numerous individual components and precise fine-tuning by production technicians. Our manufacturing facility is estimated to be capable of assembling up 100 amplifiers per month. If we receive larger quantity orders that need to be fulfilled in a short time-frame, or in excess of our capacity at the main facility, we will outsource the assembly by sending kitted raw materials to a qualified contract assembly facility in the local Northeast.

 

We are currently certified to the ISO 9001:2008 standard. ISO 9001 is a uniform worldwide Quality Management System (QMS) standard.

 

Suppliers

 

Our material consists of purchased component parts used in our assembly process. The following table describes supplier concentration based upon the percentage of materials purchased from each supplier for 2017:

 

Supplier A

 

$ 76,729

 

 

 

24.98 %

Supplier B

 

 

28,375

 

 

 

9.24 %

Supplier C

 

 

20,298

 

 

 

6.61 %

Supplier D

 

 

17,869

 

 

 

5.82 %

Supplier E

 

 

15,495

 

 

 

5.04 %

All other suppliers (approximately 49)

 

 

148,398

 

 

 

48.31 %

Total

 

$ 307,164

 

 

 

100 %

 

Marketing

 

We employ an aggressive and focused approach to market our products, at various venues including trade shows, strategic partnership and joint ventures, website and trade magazines.

We rely on our sales representatives or distributors to channel our products to about 15 countries in North America, Europe and Asia.

 

During the 4 th quarter of 2016, we entered into an agreement appointing an exclusive distributor of our products in the U.S, Canada, Mexico and South America.

 

In February 2018, the Company entered into an advisory agreement in order to promote market awareness in Asia and the Middle East.

 

Trade Shows

 

We attend trade shows such as MTTS (Microwave Theory and Techniques Show), IMS (International Microwave Symposium), EDIC (Electronic Design Innovation Conference) European Microwave Symposium, SATCON, MILCOM and the American Institute of Physics Exhibit (APS). We also sponsor in some trade shows to gain recognition and presence.

 

Strategic Partnership and Joint Ventures

 

We explore opportunities with global OEMs (Original Equipment Manufacturers) by working strategic partnerships and joint ventures that improve sales and presence in the marketplace.

 

 
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Website

 

We maintain a dynamic website to capture more business via worldwide customer searches for our products on the internet. Our website is available at www.amplitechinc.com.

 

Trade Magazines

 

We advertise our products in various trade magazines such as Microwave Journal, Microwaves & RF, High Frequency Electronics, etc.

 

Customers

 

We serve a diverse customer base located primarily in the United States, with an increasing number in Europe, and Asia, across the industries as aerospace, governmental defense, commercial satellite. Our customers include Boeing Aerospace, Viasat, IBM, NASA, Raytheon, Government of Israel, API Technologies, and L3 Integrated Systems.

 

The following table sets forth our customers that account for more than 10% of our total revenue for 2017:

 

Customer A

 

$ 396,921

 

 

 

28.75 %

Customer B

 

$ 245,800

 

 

 

17.80 %

 

While the above customers represent more than 10% our total revenue, Amplitech Inc. is not dependent solely on one major customer. However, there is no assurance that said customers will place such large orders with the Company during the next year.

 

Government Regulation

 

We are subject to a number of laws and regulations that affect companies generally and specifically those conducting business of electronics, many of which are still evolving and could be interpreted in ways that could harm our business. Existing and future laws and regulations may impede our growth. These regulations and laws may cover taxation, pricing, copyrights, distribution, electronic contracts and other communications, consumer protection, web services, and the characteristics and quality of products and services. Unfavorable regulations and laws could diminish the demand for our products and services and increase our cost of doing business. There are no specific laws or regulations applicable to our business.

 

Environmental Protection

 

We comply with RoHS requirements. RoHS stands for Restriction of Use of Hazardous Substances regulations, which limit or ban specific substances such as lead, cadmium, polybrominated biphenyl (PBB), mercury, hexavalent chromium, and polybrominated diphenyl ether (PBDE) flame retardants, in new electronic and electric equipment.

 

Intellectual Property

 

Except the domain name of “amplitechinc.com”, we currently do not own any intellectual property rights. We rely on contractual restrictions to protect our proprietary rights in products and services. It is our policy to enter into confidentiality and invention assignment agreements with our employees and contractors as well as nondisclosure agreements with our suppliers and strategic partners in order to limit access to and disclosure of our proprietary information. We cannot assure you that these contractual arrangements or the other steps taken by us to protect our intellectual property will prove sufficient to prevent misappropriation of our technology or to deter independent third-party development of similar technologies.

 

Employees

 

As of March 30, 2018 we have five full time employees. From time to time, we may hire additional workers on a contract basis as the need arises.

 

 
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ITEM 1A.   RISK FACTORS

 

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

 

ITEM 1B.   UNRESOLVED STAFF COMMENTS

 

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

 

ITEM 2.   PROPERTIES

 

Our principal executive office is located at 620 Johnson Avenue, Bohemia, NY 11716. The property at this location is leased by the Company at monthly rental expense of $4,167 for a term of five years ending January 31, 2021. The annual basic rent shall be increased by 3.75% in each successive lease year. Our wholly owned subsidiary, AmpliTech, Inc., also operates out of our principal executive office. We believe that currently this space is adequate.

 

ITEM 3.   LEGAL PROCEEDINGS

 

There are no pending legal proceedings to which we are a party or of which any of our property is the subject. From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigations are subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time and harm our business.

 

ITEM 4.   MINE SAFETY DISCLOSURES

 

Not applicable.

 

 
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PART II

 

ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information

 

Our common stock has become quoted on the OTC Bulletin Board under the symbol “AMPG” since February 22, 2013.

 

The quotations of the closing prices reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.

 

Quarters Ended

 

High

 

 

Low

 

March 31, 2016

 

$ .02

 

 

$ .02

 

June 30, 2016

 

$ .02

 

 

$ .02

 

September 30, 2016

 

$ .04

 

 

$ .04

 

December 31, 2016

 

$ .07

 

 

$ .06

 

March 31, 2017

 

$ .10

 

 

$ .06

 

June 30, 2017

 

$ .08

 

 

$ .05

 

September 30, 2017

 

$ .08

 

 

$ .04

 

December 31, 2017

 

$ .05

 

 

$ .03

 

 

Holders

 

As of March 30, 2018, there were 51 holders of record of our common stock. This does not reflect the number of persons or entities who held stock in nominee or street name through various brokerage firms.

 

Dividend Policy

 

We have never declared or paid dividends on our common stock. We do not anticipate paying any dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. Any future determination to declare dividends will be subject to the discretion of our board of directors and will depend on various factors, including applicable laws, our results of operations, financial condition, future prospects and any other factors deemed relevant by our board of directors.

 

Recent Sales of Unregistered Securities

 

There were no sales of unregistered securities during the Company’s fiscal year ended December 31, 2017 which were not previously reported.

 

ITEM 6.   SELECTED FINANCIAL DATA

 

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

 

 
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ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and the accompanying notes thereto included in “Item 8. Financial Statements and Supplementary Data.”

 

Forward-Looking Statements

 

In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements.” Our results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors.

 

Business Overview

 

We design, engineer and assemble micro-wave component based amplifiers that meet individual customer specifications. Our products consists of RF amplifiers and related subsystems, operating at multiple frequencies from 50kHz to 44GHz, including Low Noise Amplifiers, Medium Power Amplifiers, oscillators, filters, and custom assembly designs. We also offer non-recurring engineering services on a project-by-project basis, for a predetermined fixed contractual amount, or on a time plus material basis.

 

Our plans for the next year include new product development, expansion of existing product line and targeting mergers and acquisitions.

 

Results of Operations

 

As of December 31, 2017, the Company had a working capital of $439,811 and an Accumulated Deficit of $1,177,751. Additionally, there was a net loss of $97,049 and net income $456,288 for the year ended December 31, 2017 and December 31, 2016, respectively.

 

For Years Ended December 31, 2017 and December 31, 2016

 

Revenues

 

Sales decreased from $2,036,443 for the year ended December 31, 2016 to $1,380,743 for the year ended December 31, 2017, a decrease of $655,700 or approximately 32.2%. These results were impacted by the shift in new product demand. The company’s backlog of new orders required new engineering design and additional research and development. These new products are geared towards larger commercial markets to yield much higher revenue in the future.

 

Cost of Goods Sold and Gross Profit

 

Cost of Goods Sold decreased from $827,600 in 2016 to $652,444 in 2017, a decrease of $175,156 or approximately 21.2%. This decrease was the direct result of the decrease in sales for the year as well as a decrease in our outsourcing costs. As a result, the gross profit was $728,299 for 2017 compared to $1,208,843 for 2016, a decrease of $480,544 or 39.8%

 

 
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General and Administrative Expenses

 

General and administrative expenses increased to $818,395 in 2017 from $736,927 in 2016, an increase of $81,468, or approximately 11.1%. This increase primarily was due to the increase in marketing expenditures, attending additional trade shows, hiring additional sales personnel and the increase in research and development.

 

Other Income (Expenses)

 

Interest expense decreased $8,675, or 55.51%, when comparing the year ended December 31, 2017 to the year ended December 31, 2016. The decrease was primarily due to the low balance on the Company’s line of credit.

 

Net Income

 

As a result of the decrease in sales and gross profit, the Company had a net loss of $97,049 in 2017 but net income of $456,288 in 2016.

 

Liquidity and Capital Resources

 

Operating Activities

 

The net cash used in operating activities for the year ended December 31, 2017 was $166,827 resulting primarily from the decrease in net income, an increase in inventory and prepaid expenses.

 

The net cash provided by operating activities for the year ended December 31, 2016 was $346,663 resulting primarily from the increase in net income, a decrease in accounts receivable, an increase in inventory and a decrease in prepaid expenses.

 

Investing Activities

 

The net cash used in investing activities for the year ended December 31, 2017 and 2016 was $5,371 and $14,335, respectively, which was for the purchase of equipment.

 

Financing Activities

 

The net cash provided by financing activities for the year ended December 31, 2017 was $6,528 a result of borrowing against the line of credit to repay the note payable.

 

The net cash used in financing activities for the year ended December 31, 2016 was $97,703 which was used to repay the note payable, line of credit and amounts due to officer.

 

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

 

As of December 31, 2017, we had cash and cash equivalents of $117,990 a working capital of $439,811 and an accumulated deficit of $1,177,751.

 

On November 16, 2015, we terminated our factoring agreement and the balance of the loan was paid in full with the Company’s newly acquired commercial line of credit for $150,000. This credit line agreement will be paid over a three year term with monthly payments equal to 2.780% of the outstanding balance plus accrued interest. The initial variable interest rate on this agreement is 5.25% per annum. This interest rate may change every year on the anniversary date or change date to reflect the new prime rate in effect as per the Wall Street Journal plus 2%. The interest rate will never be greater than 25% or less than 5%. On April 20, 2016 the existing line of credit was increased from $150,000 to $250,000 with an extended maturity date of April 20, 2019. As of December 31, 2017 and 2016 the outstanding balance was $76,435 and $54,907, respectively. Interest expense relating to this line of credit for 2017 and 2016 was $2,721 and $4,029, respectively.

 

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

 

 
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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 that 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.

 

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.

 

Allowance for Doubtful Accounts

 

The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience and a review of the current status of Accounts Receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change in the future.

 

Depreciation and Amortization

 

Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally, accelerated depreciation methods) for tax purposes where appropriate. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements.

 

Income Taxes

 

The Company accounts for income taxes under the provisions of Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740 “ Income Tax ”. ASC 740 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of certain assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has adopted the provisions of FASB ASC 740-10-05 “Accounting for Uncertainty in Income Taxes”. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

 

 
12
 
Table of Contents

 

Inventory Obsolescence

 

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

 

Revenue Recognition

 

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

 

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

 

Use of Estimates

 

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

 

Off Balance Sheet Transactions

 

As of December 31, 2017, we did not have any off-balance sheet arrangements.

 

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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

 

 
13
 
Table of Contents

 

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

AmpliTech Group, Inc.

Index to Consolidated Financial Statements

For The Years Ended December 31, 2017 and 2016

 

Report of Independent Registered Public Accounting Firm

 

F-2

 

 

 

 

 

Consolidated Balance Sheets as of December 31, 2017 and 2016

 

F-3

 

 

 

 

 

Consolidated Statements of Operations for the years ended December 31, 2017 and 2016

 

F-4

 

 

 

 

 

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2017 and 2016

 

F-5

 

 

 

 

 

Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016

 

F-6

 

 

 

 

 

Notes to Consolidated Financial Statements

 

F-7

 

 

 
F-1
 
Table of Contents

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Shareholders of Amplitech Group, Inc.:

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Amplitech Group, Inc. (“the Company”) as of December 31, 2017 and 2016, and the related consolidated statements of operations, stockholders’(deficit), and cash flows for each of the years in the two-year period ended December 31, 2017 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ Sadler, Gibb & Associates, LLC

 

We have served as the Company’s auditor since 2013.

 

Salt Lake City, UT

April 2, 2018

 

 
F-2
 
Table of Contents

 

AmpliTech Group, Inc.

Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

(Revised)

 

Assets

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$ 117,990

 

 

$ 283,660

 

Accounts receivable

 

 

137,465

 

 

$ 146,235

 

Inventory, net

 

 

335,668

 

 

$ 266,938

 

Prepaid expenses

 

 

13,850

 

 

$ 3,705

 

Total Current Assets

 

 

604,973

 

 

 

700,538

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

51,798

 

 

 

73,290

 

Security deposits

 

 

8,753

 

 

$ 8,753

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$ 665,524

 

 

$ 782,581

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts Payable and accrued expenses

 

 

57,145

 

 

 

92,833

 

Customer deposits

 

 

31,582

 

 

 

22,430

 

Notes payable

 

 

-

 

 

 

15,000

 

Line of credit

 

 

76,435

 

 

 

54,907

 

Total Current Liabilities

 

 

165,162

 

 

 

185,170

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

165,162

 

 

 

185,170

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

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

 

 

1

 

 

 

1

 

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

 

 

-

 

 

 

-

 

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

 

 

46,136

 

 

 

46,136

 

Additional paid-in capital

 

 

1,631,976

 

 

 

1,631,976

 

Accumulated deficit

 

 

(1,177,751 )

 

 

(1,080,702 )

 

 

 

 

 

 

 

 

 

Total Stockholders' Equity

 

 

500,362

 

 

 

597,411

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Equity

 

$ 665,524

 

 

$ 782,581

 

 

See accompanying notes to the consolidated financial statements

 

 
F-3
 
Table of Contents

 

AmpliTech Group, Inc.

Consolidated Statements of Operations

For The Years Ended December 31 , 2017 and 2016

 

 

 

 

 

 

2017

 

 

2016

 

 

 

 

 

 

  (Revised)

 

 

 

 

 

 

 

 

Revenue

 

$ 1,380,743

 

 

$ 2,036,443

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

652,444

 

 

 

827,600

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

728,299

 

 

 

1,208,843

 

 

 

 

 

 

 

 

 

 

General and administrative expense

 

 

818,395

 

 

 

736,927

 

 

 

 

 

 

 

 

 

 

(Loss) Income From Operations

 

 

(90,096 )

 

 

471,916

 

 

 

 

 

 

 

 

 

 

Other Income (Expense)

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(6,953 )

 

 

(15,628 )

 

 

 

 

 

 

 

 

 

(Loss) Income Before Income Taxes

 

 

(97,049 )

 

 

456,288

 

 

 

 

 

 

 

 

 

 

Provision For Income Taxes

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Net (Loss) Income

 

 

(97,049 )

 

 

456,288

 

 

 

 

 

 

 

 

 

 

Net (Loss) Income Per Share;

 

 

 

 

 

 

 

 

Basic

 

$ (0.00 )

 

$ 0.01

 

Diluted

 

$ (0.00 )

 

$ 0.01

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding;

 

 

 

 

 

 

 

 

Basic

 

 

46,136,326

 

 

 

46,136,326

 

Diluted

 

 

46,136,326

 

 

 

85,743,945

 

 

See accompanying notes to the consolidated financial statements

 

 
F-4
 
Table of Contents

 

Amplitech Group, Inc.

Consolidated Statements of Stockholders' Equity

For The Years Ended December 31,2017 and 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A

Convertible

Preferred

 

 

Common

Stock  

 

 

Additional

 

 

 

 

 

Total

 

 

 

Number of

 

 

Par

 

 

Number of

 

 

Par

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2015

 

 

1,000

 

 

 

1

 

 

 

46,136,326

 

 

 

46,136

 

 

 

1,631,976

 

 

 

(1,536,990 )

 

 

141,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income for the year ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

456,288

 

 

 

456,288

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2016

 

 

1,000

 

 

 

1

 

 

 

46,136,326

 

 

 

46,136

 

 

 

1,631,976

 

 

 

(1,080,702 )

 

 

597,411

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss)for the year ended December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(97,049 )

 

 

(97,049 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2017

 

 

1,000

 

 

 

1

 

 

 

46,136,326

 

 

 

46,136

 

 

 

1,631,976

 

 

 

(1,177,751 )

 

 

500,362

 

 

See accompanying notes to the consolidated financial statements

 

 
F-5
 
Table of Contents

  

AmpliTech Group, Inc.

Consolidated Statements of Cash Flows

For The Years Ended December 31, 2017 and 2016

 

 

 

 

 

 

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

  (Revised)

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net (Loss) Income

 

$ (97,049 )

 

$ 456,288

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

26,863

 

 

 

28,859

 

Changes in Operating Assets and Liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

8,770

 

 

 

29,634

 

Inventory

 

 

(68,730 )

 

 

(121,123 )

Prepaid expenses

 

 

(10,145 )

 

 

9,367

 

Security deposits

 

 

-

 

 

 

(320 )

Accounts payable and accrued expenses

 

 

(35,688 )

 

 

(842 )

Customer deposits

 

 

9,152

 

 

 

(55,200 )

 

 

 

 

 

 

 

 

 

Total Adjustments

 

 

(69,778 )

 

 

(109,625 )

 

 

 

 

 

 

 

 

 

Net cash (used in) provided by operating activities

 

 

(166,827 )

 

 

346,663

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Purchase of equipment

 

 

(5,371 )

 

 

(14,335 )

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

(5,371 )

 

 

(14,335 )

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Advance from (repayment to) line of credit, net

 

 

21,528

 

 

 

(7,454 )

Note repayment

 

 

(15,000 )

 

 

(11,958 )

Proceeds from officer

 

 

-

 

 

 

20,000

 

Repayment of amounts due to officer

 

 

-

 

 

 

(98,291 )

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

 

6,528

 

 

 

(97,703 )

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

(165,670 )

 

 

234,625

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, Beginning of Period

 

 

283,660

 

 

 

49,035

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, End of Period

 

$ 117,990

 

 

$ 283,660

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for interest expense

 

$ 7,098

 

 

$ 15,700

 

Cash paid for income taxes

 

$ 53

 

 

$ 750

 

 

See accompanying notes to the consolidated financial statements

 

 
F-6
 
Table of Contents

 

AmpliTech Group, Inc.

Notes To Consolidated Financial Statements

For The Years Ended December 31, 2017 and 2016

 

(1) Organization and Business Description

 

AmpliTechGroup Inc. (“AmpliTech” or “the Company”) was incorporated under the laws of the State of Nevada on December 30, 2010. On August 13, 2012, the Company acquired AmpliTech Inc., by issuing 16,675,000 shares of the Company’s Common Stock to the shareholders of Amplitech Inc. in exchange for 100% of the outstanding shares of AmpliTech Inc. (“the Share Exchange”). After the Share Exchange, the selling shareholders owned 1,200,000 shares of the outstanding 17,785,000 shares of Company common stock, resulting in a change in control. Accordingly, the transaction was accounted for as a reverse acquisition in which AmpliTech, Inc. was deemed to be the accounting acquirer, and the operations of the Company were consolidated for accounting purposes. The capital balances have been retroactively adjusted to reflect the reverse acquisition.

 

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

 

(2) Summary of Significant Accounting Policies

 

Basis of Accounting

 

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

 

Principles of Consolidation

 

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

 

Cash and Cash Equivalents

 

The Company considers deposits that can be redeemed on demand and investments that have original maturities of less than three months, when purchased, to be cash equivalents. As of December 31, 2017 the Company’s cash and cash equivalents were deposited primarily in one financial institution.

 

 
F-7
 
Table of Contents

 

AmpliTech Group, Inc.

Notes To Consolidated Financial Statements

For The Years Ended December 31, 2017 and 2016

 

Allowance for Doubtful Accounts

 

The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience and a review of the current status of accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change in the future. An allowance of $0 has been recorded at December 31, 2017 and 2016, respectively.

 

Depreciation and Amortization

 

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

 

Income Taxes

 

The Company accounts for income taxes under the provisions of Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740 “ Income Tax ”. ASC 740 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of certain assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has adopted the provisions of FASB ASC 740-10-05 “Accounting for Uncertainty in Income Taxes”. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At December 31, 2017 and 2016, the Company had no material unrecognized tax benefits.

 

 
F-8
 
Table of Contents

 

AmpliTech Group, Inc.

Notes To Consolidated Financial Statements

For The Years Ended December 31, 2017 and 2016

 

Earnings Per Share

 

Basic earnings (loss) per share (“EPS”) are determined by dividing the net earnings (loss) by the weighted-average number of shares of common shares outstanding during the period. Diluted EPS is determined by dividing net earnings (loss) by the weighted average number of common shares used in the basic EPS calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding under the treasury stock method. As of December 31, 2017 and 2016 there were 40,000,000 and 40,000,000, respectively potential dilutive shares that needed to be considered as common share equivalents.

 

Inventory Obsolescence

 

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

 

Revenue Recognition

 

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

 

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

 

Use of Estimates

 

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

 

 
F-9
 
Table of Contents

 

AmpliTech Group, Inc.

Notes To Consolidated Financial Statements

For The Years Ended December 31, 2017 and 2016

 

Concentration of Credit Risk

 

Financial instruments that potentially subject the company to concentration of credit risk consist primarily of accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses. Therefore, management does not believe significant credit risks exist at December 31, 2017. Sales to the Company’s two largest customers represented approximately 29% and 18% of total sales for the year ended December 31, 2017.

 

Recent Accounting Pronouncements

 

In May 2014, the FASB issued ASU 2014-09, “ Revenue From Contracts With Customers ,” which changes the definitions/criteria used to determine when revenue should be recognized from being based on risks and rewards to being based on control. Among other changes, ASU 2014-09 changes the manner in which variable consideration is recognized, requires recognition of the time value of money when payment terms exceed one year, provides clarification on accounting for contract costs, and expands disclosure requirements. ASU 2014-09 is effective for reporting periods beginning after December 15, 2017. Although the Company will not complete its final assessment and quantification of the impact of ASU 2014-09 on its consolidated financial statements until adoption, it expects the adoption to have the effect of accelerating the timing of revenue recognition compared to current standards for those arrangements under which the Company is producing customer-specific products without alternative use and would be entitled to payment for work completed, including a reasonable margin. The Company is still in the process of developing an estimate of the impact of the transition adjustment on its consolidated financial statements.

 

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business (“ASU 2017-01”). The Amendments in this Update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting, including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those periods. Early adoption of this standard is permitted.

 

Fair Value of Assets and Liabilities

 

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

 

 
F-10
 
Table of Contents

 

AmpliTech Group, Inc.

Notes To Consolidated Financial Statements

For The Years Ended December 31, 2017 and 2016

 

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

 

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

 

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

 

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

 

Application of Valuation Hierarchy

 

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

 

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 years ended December 31, 2017 and 2016 were $68,447 and $35,369, respectively.

 

 
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AmpliTech Group, Inc.

Notes To Consolidated Financial Statements

For The Years Ended December 31, 2017 and 2016

 

(3) Inventory

 

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

 

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Raw Materials

 

$ 216,911

 

 

$ 189,373

 

Work-in Progress

 

 

77,233

 

 

 

48,791

 

Finished Goods

 

 

107,798

 

 

 

90,048

 

Engineering Models

 

 

3,726

 

 

 

3,726

 

 

 

 

 

 

 

 

 

 

Subtotal

 

$ 405,668

 

 

$ 331,938

 

Less: Reserve for Obsolescence

 

 

(70,000 )

 

 

(65,000 )

 

 

 

 

 

 

 

 

 

Total

 

$ 335,668

 

 

$ 266,938

 

 

(4) Property and Equipment

 

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

 

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Lab Equipment

 

$ 563,434

 

 

$ 560,833

 

Furniture and Fixtures

 

 

14,338

 

 

 

11,568

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

577,772

 

 

 

572,401

 

Less: Accumulated Depreciation

 

 

(525,974 )

 

 

(499,111 )

 

 

 

 

 

 

 

 

 

Total

 

$ 51,798

 

 

$ 73,290

 

 

Depreciation expense for the years ended December 31, 2017 and 2016 were $26,863 and $28,859 respectively.

 

 
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AmpliTech Group, Inc.

Notes To Consolidated Financial Statements

For The Years Ended December 31, 2017 and 2016

 

(5) Notes Payable

 

Notes Payable at December 31, 2016 included a demand note totaling $15,000 from one corporation with an interest rate of 8% per annum. Accrued interest related to this note was $9,889 as of December 31, 2016. The note payable was paid in full as of December 31, 2017. Interest expense related to this note for the years ended December 31, 2017 and 2016 were $1,032 and $2,031 respectively.

 

(6) Line of Credit

 

On November 16, 2015, the Company entered into a commercial line of credit for $150,000. This agreement will be paid over a three year term with monthly payments equal to 2.780% of the outstanding balance plus accrued interest. The initial variable interest rate on this agreement is 5.25% per annum. This interest rate may change every year on the anniversary date or change date to reflect the new prime rate in effect as per the Wall Street Journal plus 2%. The interest rate will never be greater than 25% or less than 5%. On April 20, 2016, the existing line of credit was increased from $150,000 to $250,000 with an extended maturity date of April 20, 2019. The outstanding balance as of December 31, 2017 and 2016 was $76,435 and $54,907, respectively. Interest expense relating to this line of credit for 2017 and 2016 was $2,721 and $4,029, respectively.

 

(7) Income Taxes

 

The provision for (benefit from) income taxes for the years ended December 31, 2017 and 2016 are as follows, assuming a combined effective tax rate of approximately 35%.

 

 

 

2017

 

 

2016

 

Federal and state net operating loss

 

 

(38,820

 

 

209,124

 

 

 

 

 

 

 

 

 

 

Meals & entertainment

 

 

152

 

 

 

83

 

 

 

 

 

 

 

 

 

 

Life insurance

 

 

1,572

 

 

 

1,572

 

 

 

 

 

 

 

 

 

 

Tax penalty

 

 

-

 

 

 

58

 

 

 

 

 

 

 

 

 

 

Depreciation

 

 

1,403

 

 

 

1,403

 

 

 

 

 

 

 

 

 

 

State tax, net of federal benefit

 

 

 1,941

 

 

 

 (9,126

 

 

 

 

 

 

 

 

 

Other

 

 

(3,344

 

 

23,946

 

 

 

 

 

 

 

 

 

 

Change in Valuation Allowance

 

 

37,097

 

 

(409,576 )

 

 

 

 

 

 

 

 

 

Total income tax provision

 

$ -

 

 

$ -

 

 

 
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AmpliTech Group, Inc

Notes To Consolidated Financial Statements

For The Years Ended December 31, 2017 and 2016

 

The Company had deferred tax income tax assets as of December 31, 2017 and 2016 as follows:

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Net operating loss carryforwards

 

$ 225,654

 

 

$ 189,960

 

Depreciation

 

 

15,102

 

 

 

13,699

 

Stock based compensation

 

 

200,480

 

 

 

200,480

 

Valuation allowance

 

 

(441,236 )

 

 

(404,139 )
Total net deferred tax assets

 

 

-

 

 

 

-

 

 

The Company has maintained a full valuation allowance against the total deferred tax assets for all periods due to the uncertainty of future utilization.

 

As of December 31, 2017, the Company has net federal and state net operating loss carry forwards of approximately $560,000 that begin to expire in 2037.

 

(8) Capital Stock

 

Preferred Stock

 

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

 

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

 

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

 

 
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AmpliTech Group, Inc.

Notes To Consolidated Financial Statements

For The Years Ended December 31, 2017 and 2016

 

Common Stock:

 

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

 

Options:

 

During 2014, the Company granted the chief executive officer of the Company an immediately exercisable option to purchase an aggregate of 400,000 shares of Series A at an exercise price of $0.0206 per share of the underlying common stock. There is no expiration date for this option and the related expense has been recorded in prior years.

 

(9) Commitments and Contingencies:

 

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

 

The following is a schedule of the future minimum rental payments under the office space lease:

 

Year ending December 31,

 

 

 

2018

 

 

53,658

 

2019

 

 

55,670

 

2020

 

 

57,758

 

2021

 

 

4,828

 

 

 

 

 

 

Total

 

$ 171,914

 

 

Rent expense for December 31, 2017 and 2016 were $51,719 and $49,615, respectively.

 

 
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AmpliTech Group, Inc.

Notes To Consolidated Financial Statements

For The Years Ended December 31, 2017 and 2016

 

(10) Revision of Prior Year Financial Statements:

 

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

 

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

 

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

 

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

  

 

 

December 31, 2016

 

 

 

As Previously

Reported

 

 

 Adjustment

 

 

 As

Revised

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

 

Accounts Payable and accrued expenses

 

$ 133,925

 

 

$ (41,092 )

 

$ 92,833

 

Total Current Liabilities

 

 

226,262

 

 

 

(41,092 )

 

 

185,170

 

Total Liabilities

 

$ 226,262

 

 

$ (41,092 )

 

$ 185,170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Total Stockholders’ Equity

 

 

556,319

 

 

 

41,092

 

 

 

597,411

 

Total Liabilities and Stockholders’ Equity

 

$ 782,581

 

 

$ 41,092

 

 

$ 782,581

 

 

 

 

For the year ended

December 31, 2016

 

Statement of Operations

 

 As Previously

Reported

 

 

 Adjustments

 

 

  As

Revised

 

Provision for Income Taxes

 

$ 41,092

 

 

$ (41,092 )

 

$ -

 

Net income

 

$ 415,196

 

 

$ 41,092

 

 

$ 456,288

 

 

 
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AmpliTech Group, Inc.

Notes To Consolidated Financial Statements

For The Years Ended December 31, 2017 and 2016

  

 

 

For the year ended

December 31, 2016

 

 

 

As Previously

 

 

 

 

 

As  

 

 

 

Reported

 

 

Adjustments

 

 

Revised

 

 

 

 

 

 

 

 

 

 

 

Statement of Cash Flows

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

Net Income

 

$ 415,196

 

 

$ 41,092

 

 

$ 456,288

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

40,250

 

 

 

(41,092 )

 

 

(842

Total adjustments

 

 

(68,533 )

 

 

(41,092 )

 

 

(109,625 )

   

(11) Subsequent events

 

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

 

On February 14, 2018, the Company entered into an advisory agreement to assist in product sales and distribution in Asia and the Middle East. The advisor will be paid compensation of a total of 2.2 million shares of restricted common stock at the current market price. The first installment of 500,000 shares was issued on February 14, 2018 at a market price of $0.0325. The final installment of 1,700,000 shares will be issued in April 2018.

 

 
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ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A.   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 the evaluation as of December 31, 2017, for the reasons set forth below, 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.

 

Management’s Annual Report on Internal Control Over Financial Reporting.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to, in general, provide reasonable assurance to our management and the Board of Directors regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

 

Our chief executive officer and chief financial officer evaluated the effectiveness of our internal control over financial reporting as of December 31, 2017, and based on that evaluation they concluded that our internal control over financial reporting were effective.

 

The framework used by management in making that assessment was the criteria set forth in the document entitled “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that re-evaluation due to material weakness identified below, our management, including our chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were effective as of December 31, 2017 to ensure that information required to be disclosed in our Exchange Act reports was (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure, because of material weaknesses in our internal controls over financial reporting.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

 

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.

 

ITEM 9B.   OTHER INFORMATION

 

None.

 

 
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PART III

 

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Our executive officers and directors are as follows:

 

Name

 

Age

 

Position

 

Fawad Maqbool (1)

 

57

 

Chairman, President, Chief Executive Officer, and Treasurer and a Director

 

Louisa Sanfratello (2)

 

52

 

Chief Financial Officer and Secretary

 

 

 

 

 

Henry Val (3)

 

57

 

Director

__________

(1)

Mr. Maqbool was appointed as our Chairman, President, Chief Executive Officer, Treasurer and Secretary on August 13, 2012 upon the closing of the Share Exchange. On August 22, 2012, Mr. Maqbool resigned as the Company’s Secretary.

 

(2)

Ms. Sanfratello was appointed as our Chief Financial Officer on August 13, 2012 upon the closing of the Share Exchange. On August 22, 2012, Ms. Sanfratello was appointed as the Company’s Secretary.

 

 

(3)

Mr.Val was appointed on January 22, 2018.

 

A brief description of the background and business experience of our executive officer and director for the past five years is as follows:

 

Fawad Maqbool , age 57, has served as the President, Chief Executive Officer and Chairman of the Board of Directors since founding Amplitech, Inc. 2002. He has also been the majority shareholder of the Company since its inception. Prior to founding Amplitech, Inc., Mr. Maqbool was the President of Aeroflex Amplicomm, Inc. for 2000 and 2001. His duties included, among other things, overseeing the design and development of amplifiers specifically for fiber optic communication applications. Mr. Maqbool was with MITEQ, Inc. from 1987 through 1999 where he began as an Engineering Group Leader and ultimately held the title of Department Head responsible for a staff of thirty-two consisting of engineers, technicians, assemblers and support personnel. His professional career began with the Hazeltine Corporation in 1983 where he was a Microwave Design Engineer through 1986. Mr. Maqbool received bachelor degrees in electrical engineering (major in microwaves and RF) and biomedical engineering from the City College of New York. He subsequently earned a master’s degree in electrical engineering (major in microwaves and RF) from Polytechnic University.

 

Through his prior service, Mr. Maqbool possesses the knowledge and experience in microwaves and RF electrical engineering that aids him in efficiently and effectively identifying and executing the Company’s strategic priorities.

 

Louisa Sanfratello , CPA, age 52 has been an accountant servicing numerous clients in various industries since 1987. Her professional career began with the public accounting firm of Holtz Rubenstein & Co, where she gathered invaluable experience for several years and moved on to more challenging positions in both the public and private sector. She served as a Controller for The New Interdisciplinary School for over 10 years. Her responsibilities included overseeing the accounting department in addition to working directly with the NYS Department of Education. Ms. Sanfratello was also employed by the Make A Wish Foundation of Suffolk County as chief accountant working directly with the President and CFO. She serves on the Advisory Board as a financial consultant for the local chapter of the Down Syndrome Advocacy Foundation. She joined Amplitech, Inc. in 2012 as Chief Financial Officer, where she manages the company’s finances and SEC filings. Her responsibilities also include assisting the CEO in developing new business, maintaining operating budgets and ensuring adequate cash flow.

 

Henry Val, age 57, is the CEO of TGI Power Group Inc. Prior to TGI, Mr. Val was a Managing Partner for Netter Capital Partners. He has over twenty-five years of experience in the financial markets ranging from trading global futures and equity markets, senior secured debt, convertible securities, private investments in public equities (PIPEs) and investing. Prior to forming Netter Capital Partners, Henry was a Partner with Delta Capital LLC, a boutique advisory firm, specializing in M&A, management consulting, turnaround situations and other advisory services. Mr. Val has over 30 years of hands on experience with large, small and startup bio/pharma, software, systems, power, oil and gas, media and renewable energy companies. He served as CEO, or similar level, of private and publicly traded companies, has established a consistently strong record of bringing high growth, fast turnaround, a return to profitability. He is a successful builder of performance-oriented teams and businesses. Mr. Val uses economic results to drive products and services in high value global markets. A “known” game changer, who generates best in class shareholder value to maximize the return on assets and investments. Mr. Val is able to discern the key products, markets, personnel and needs that minimizes time for a positive shareholder outcome. Mr. Val also served as CEO of Maxplanet Corp. and New Life Scientific Inc.  

 

Term of Office

 

Our directors are appointed for a one-year term to hold office until the next annual general meeting of our stockholders or until removed from office in accordance with our bylaws. Our officers are appointed by our Board of Directors and holds office until removed by the Board of Directors.

 

On January 22, 2018, two additional directors, Louisa Sanfratello and Henry Val were appointed to the Board of Directors.

 

Family Relationships

 

There are no family relationships between any of our directors or executive officers.

 

Involvement in Legal Proceedings

 

To our knowledge, there have been no material legal proceedings that would require disclosure under the federal securities laws that are material to an evaluation of the ability of our director or executive officers.

 

Potential Conflicts of Interest

 

We are not aware of any current or potential conflicts of interest with our director or executive officers.

 

 
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Board Committees

 

We have not formed an Audit Committee, Compensation Committee or Nominating and Corporate Governance Committee as of the filing of this Annual Report. Our Board of Directors performs the principal functions of an Audit Committee. We currently do not have an audit committee financial expert on our Board of Directors. We believe that an audit committee financial expert is not required because the cost of hiring an audit committee financial expert to act as one of our directors and to be a member of an Audit Committee outweighs the benefits of having an audit committee financial expert at this time.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires our directors, officers and persons who beneficially own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC and are required to furnish us with copies of these reports. Based solely on our review of the reports filed with the SEC, we believe that all persons subject to Section 16(a) of the Exchange Act timely filed all required reports in 2017.

 

Code of Ethics

 

We currently do not have a code of ethics that applies to our officers, employees and director, including our Chief Executive Officer, however, we are in the process of formulating a code of ethics and intend to adopt one in the near future.

 

Item 11.   EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to, the named person, during the years ended December 31, 2017 and 2016:

 

Summary Compensation of Named Executive Officers

 

Name and Principal Position

 

Fiscal

Year

 

Salary

($)

 

 

Bonus

($)

 

 

Stock

Awards

($)

 

 

All Other

Compensation

($)

 

 

Total

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fawad Maqbool

 

2017

 

 

150,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

150,000

 

Chairman, President and Chief Executive Officer

 

2016

 

 

150,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

150,000

 

 

Outstanding Equity Awards at Fiscal Year End

 

Except as indicated in the above table, none of our executive officers received any equity awards, including, options, restricted stock or other equity incentives during the fiscal year ended December 31, 2017 and 2016.

 

Compensation of Our President and Chief Executive Officer

 

Fawad Maqbool, has authority and discretion to determine his own compensation for serving as the Company’s President and Chief Executive Officer.

 

Compensation of Directors

 

During the year ended December 31, 2017 and 2016, Fawad Maqbool did not receive any compensation solely for service as a director.

 

 
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Compensation Committee Interlocks and Insider Participation

 

During the fiscal years of 2017 and 2016, we did not have a standing compensation committee. Our board of directors was responsible for the functions that would otherwise be handled by the compensation committee. The sole director conducted deliberations concerning executive officer compensation, including directors who were also executive officers. Fawad Maqbool, as our sole director, has authority and discretion to determine his own compensation for serving as the Company’s President and Chief Executive Officer.

 

Item 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth certain information with respect to the beneficial ownership of our voting securities by (i) each director and named executive officer, (ii) all executive officers and directors as a group; and (iii) each shareholder known to be the beneficial owner of 5% or more of the outstanding common stock of the Company as of March 23, 2018. Beneficial ownership is determined in accordance with the rules of the SEC. Generally, a person is considered to beneficially own securities: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, and (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days (such as through exercise of stock options or warrants). For purposes of computing the percentage of outstanding shares held by each person or group of persons, any shares that such person or persons has the right to acquire within 60 days are deemed to be outstanding, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership. Unless otherwise indicated below, the address of each person listed in the table below is c/o 620 Johnson Avenue, Bohemia, NY 11716.

 

 

 

Amount and Nature of

Beneficial Ownership

 

 

 

Common Stock (1)

 

Name and Address of Beneficial Owner Directors and Officers

 

No. of Shares

 

 

% of Class

 

 

 

 

 

 

 

Fawad Maqbool,(2) Chairman, President, and Chief Executive Officer

 

 

11,780,280

 

 

 

25.26 %

Louisa Sanfratello, Chief Financial Officer

 

 

200,000

 

 

Less than 2

%

All officers and directors as a group (2 persons)

 

 

11,980,280

 

 

 

25.69 %

 

 

 

 

 

 

 

 

 

5% Security Holders

 

 

 

 

 

 

 

 

Microphase Corporation 587 Connecticut Aveunue Norwalk, CT 06854

 

 

7,743,940

 

 

 

16.60 %

__________

(1)

Based on 46,636,326 shares of common stock issued and outstanding .

(2)

Excludes (i) 140,000 shares of Series A Convertible Preferred Stock and (ii) an option to purchase 400,000 shares of Series A Preferred Stock. The holder of the Series A Convertible Preferred is entitled to 51% of the total votes on all matters and each outstanding share of Series A is convertible at the option of the holder into 100 shares of the Company’s common stock at a conversion price of $0.0206 per share.

 

 
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Table of Contents

 

Item 13.   CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

The following sets forth a summary of transactions since the beginning of the fiscal year of 2017, or any currently proposed transaction, in which the Company was to be a participant and the amount involved exceeded or exceeds $120,000 and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Executive Compensation”). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.

 

Our principal executive officer and director, Fawad Maqbool, advanced monies to the Company for working capital. The amount due was unsecured, interest bearing and payable upon demand. The balance and highest principal amount was $78,291 during the year ending December 31, 2016. As of December 31, 2017 the balance was paid in full.

 

Director Independence

 

Fawad Maqbool, a member of our Board of Directors, is not independent using the definition of independence under NASDAQ Listing Rule 5605(a)(2) and the standards established by the SEC.

 

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

The following table shows the aggregate fees we paid for professional services provided to us for 2017 and 2016:

 

 

 

2017

 

 

2016

 

Audit Fees

 

$ 34,296

 

 

$ 32,057

 

Audit-Related Fees

 

 

0

 

 

 

0

 

Tax Fees

 

 

2,775

 

 

 

3,275

 

All Other Fees

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

Total

 

$ 37,071

 

 

$ 35,332

 

 

Audit Fees

 

For the year ended December 31, 2017 and 2016, we paid $34,926 and $32,057 respectively for professional services rendered for the audit and review of our financial statements.

 

Audit Related Fees

 

For the fiscal years ended December 31, 2017 and 2016, we paid approximately $0 and $0, respectively, for audit related services.

 

Tax Fees

 

For our fiscal years ended December 31, 2017 and 2016, we paid $2,775 and $3,275 respectively, for professional services rendered for tax compliance, tax advice, and tax planning.

 

 
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All Other Fees

 

We did not incur any other fees related to services rendered by our independent registered public accounting firm for the fiscal years ended December 31, 2017 and 2016.

  

The SEC requires that before our independent registered public accounting firm is engaged by us to render any auditing or permitted non-audit related service, the engagement be either: (i) approved by our Audit Committee or (ii) entered into pursuant to pre-approval policies and procedures established by the Audit Committee, provided that the policies and procedures are detailed as to the particular service, the Audit Committee is informed of each service, and such policies and procedures do not include delegation of the Audit Committee’s responsibilities to management.

 

We do not have an Audit Committee. Our Board of Directors pre-approves all services provided by our independent registered public accounting firm. All of the above services and fees during 2017 were pre-approved by our Board of Directors. We do not have a record of the percentage of the above fees that were pre-approved in 2017. However, all of the above services in 2017 were reviewed and approved by our Board of Directors either before or after the respective services were rendered.

 

 
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Item 15. Exhibits and Financial Statement Schedules.

 

(a) Documents filed as part of this Annual Report.

 

 

1.

Report of Independent Registered Public Accounting Firm

 

Consolidated Balance Sheets as of December 31, 2017 and 2016

Consolidated Statements of Operations for the years ended December 31, 2017 and 2016

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2017 and 2016

Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016

Notes to Consolidated Financial Statements

 

 

2.

Financial Statement Schedules

 

Exhibits:

 

Exhibit No.

 

Description

 

3.1

 

Articles of Incorporation, incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10 filed on April 19, 2011, as subsequently amended.

3.2

 

Certificate of Amendment to Articles of Incorporation dated July 31, 2012, incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 filed on August 13, 2012.

3.4

 

By-laws, incorporated herein by reference to Exhibit 3.2 the Company’s Registration Statement on Form 10 filed on April 19, 2011, as subsequently amended.

3.5

Certificate of Designation of Series B Convertible Preferred Stock dated April 23, 2015 filed on May 6, 2015.

10.1

 

Commercial Line of Credit Agreement dated November 16, 2015.

10.2

 

Certificate of Designation of Series A Convertible Preferred Stock dated April 23, 2015.

21.1

 

List of Subsidiaries, incorporated by reference to Exhibit 21.1 to the Company’s Registration Statement on Form S-1 filed on August 13, 2012.

31.1

 

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

31.2

 

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

32.1

 

Section 1350 Certification of Principal Executive Officer

32.2

 

Section 1350 Certification of Principal Financial Officer

 

101. INS*

 

XBRL Instance Document

 

101. SCH*

 

XBRL Taxonomy Extension Schema Document

 

101. CAL*

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

101. DEF*

 

XBRL Taxonomy Extension Definition Linkbase Document

 

101. LAB*

 

XBRL Taxonomy Extension Label Linkbase Document

 

101. PRE*

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 
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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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: April 2, 2018

By:

/s/ Fawad Maqbool

 

Fawad Maqbool

 

President and Chief Executive Officer

(principal executive officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Name

 

Title

 

Date

 

/s/ Fawad Maqbool

 

President, Chief Executive Officer and

 

April 2, 2018

Fawad Maqbool

 

Chairman of the Board of Directors (principal executive officer)

 

/s/ Louisa Sanfratello

 

Chief Financial Officer and Secretary

 

April 2, 2018

Louisa Sanfratello

 

(principal financial and accounting officer)

 

 

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