AmpliTech Group, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2015. The company designs and assembles customer-specific microwave component amplifiers and related subsystems. Financial statements are unaudited.
Financial performance and position
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Sales | $380,233 | $308,831 | $1,107,472 | $952,194 |
| Gross profit | $168,242 | $133,283 | $561,318 | $455,686 |
| Gross margin | 44.2% | 43.1% | 50.7% | 47.9% |
| Operating income (loss) | $23,350 | ($43,400) | $82,986 | ($55,718) |
| Interest expense | $7,844 | $43,054 | $27,217 | $169,186 |
| Net income (loss) | $15,506 | ($86,454) | $55,769 | ($725,072) |
At September 30, 2015, cash was $26,090; current assets were $340,655; current liabilities were $294,565; and working capital was $46,090. Total assets were $441,407, total liabilities $294,565, and stockholders’ equity $146,842. Current liabilities included $26,958 of notes payable, $75,580 of factor financing, and $55,291 due to the CEO. No capital lease balance remained. The company reported $46,136,326 common shares outstanding.
For the first nine months, operating activities generated $16,645 of cash; investing activities used $1,575; and financing activities used $8,142. Cash increased by $6,928 from $19,162 at year-end 2014. Cash interest paid was $27,217.
Changes versus prior comparable periods
- Nine-month sales rose $155,278, or approximately 16%; Q3 sales increased $71,402, or approximately 23%. Management attributed growth to increased production capacity from more efficient outsourced assembly, including recurring domestic and foreign orders.
- Nine-month gross profit increased $105,632. Management attributed the improvement to a low-margin 2014 domestic order not recurring in the comparable 2015 shipments. Q3 gross profit increased $34,959, with management citing higher-margin recurring foreign orders and outsourcing efficiencies.
- Nine-month general and administrative expenses decreased $33,072 to $478,332; Q3 expenses decreased $31,791 to $144,892. The company cited lower investor-relations and consulting expenses.
- Nine-month interest expense fell $141,969, or approximately 84%, primarily because convertible debt interest had been extinguished in 2014. The 2014 nine-month loss also included a $501,200 charge related to issuance of Series A convertible preferred stock.
- Working capital improved from a $30,145 deficit at December 31, 2014 to a $46,090 surplus at September 30, 2015; stockholders’ equity rose from $91,073 to $146,842.
Outlook, risks, and other notable items
- Going concern: Management and the filing state that substantial doubt exists about the company’s ability to continue as a going concern. The company reported an accumulated deficit of $1,531,271 and cited its limited working capital and 2014 annual net loss of $770,070. It expects to need additional funding; there is no assurance its plans will succeed.
- Management said it expects cash on hand, operating cash flow, borrowings, or debt or equity offerings to fund operations for the next 12 months, but disclosed no financing agreements or assurances that funding will be available. Plans include pursuing customers, developing products, and expanding domestic and international distribution.
- A proposed $500,000 Series B preferred-stock investment did not proceed; no Series B shares were outstanding at quarter-end. No common shares were issued in the first nine months of 2015.
- The company reported no material subsequent events, pending legal proceedings, or off-balance-sheet transactions. Management judged disclosure controls effective and reported no material changes in internal control over financial reporting.
- Forward-looking statements are subject to risks and uncertainties; the filing gives no quantified revenue or earnings guidance.
Important facts for investors to verify
- How the company will fund operations given cash of $26,090, low working capital, and the stated going-concern uncertainty; confirm the availability and terms of any financing.
- Whether sales growth and improved margins are sustainable and how dependent results are on recurring orders, outsourcing, and customer concentration; the filing does not provide a clear customer-concentration value.
- Clarify the earnings-per-share and dilution disclosures: the statements show net income but display EPS as “($0.00)” for 2015, and show 85,806,726 weighted-average diluted shares while the notes state there were no dilutive common-share equivalents.
- Confirm period labeling in the stockholders’ equity statement, which describes the $55,769 net income as being for the six months ended June 30, although that amount matches the reported nine-month net income.
- Monitor factor financing, the demand note, and amounts due to the CEO, including their repayment terms and effect on liquidity.