AmpliTech Group, Inc. — FY2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015; filed March 31, 2016. The company designs and assembles custom RF amplifiers and related microwave components for aerospace, defense, satellite and communications markets. Financial statements are audited and prepared under U.S. GAAP.
Financial performance and position
| Metric | FY2015 | FY2014 |
|---|---|---|
| Revenue | $1,484,793 | $1,276,111 |
| Gross profit / gross margin | $733,086 / 49.4% | $613,055 / 48.0% |
| Operating income (loss) | $86,580 | ($70,830) |
| Net income (loss) | $50,050 | ($770,070) |
| Net cash from (used in) operations | $29,809 | ($53,811) |
- Revenue rose $208,682, or 16.4%, attributed to completion of domestic and international order backlog. Cost of goods sold increased 13.4%; gross profit increased 19.6%.
- General and administrative expense declined 5.5% to $646,506, mainly due to lower investor-relations and consulting costs. Interest expense fell to $36,530 from $200,120.
- Cash and cash equivalents were $49,035 at year-end, versus $19,162 in 2014. Working capital was $44,876; current assets were $383,791 and current liabilities $338,915, a current ratio of approximately 1.13x.
- Total liabilities were $338,915, all classified as current. Key obligations included $62,361 on a line of credit, $26,958 in notes payable, and $78,291 due to the CEO. The CEO advance is unsecured, interest-bearing and payable on demand.
- Net cash increased $29,873 during 2015. Investing cash use was $1,575; financing provided $1,639. The company ended 2015 with an accumulated deficit of $1,536,990.
Material changes and unusual items
- The return to profitability followed FY2014’s $501,200 non-cash compensation charge related to Series A preferred shares issued to the CEO, as well as substantially higher interest expense. The 2014 net loss was also affected by these items.
- The company terminated its receivables factoring arrangement in November 2015 and used a newly obtained $150,000 commercial line of credit to repay the factor. The year-end line balance was $62,361; its initial variable rate was 5.25%, subject to a 5% floor and 25% cap.
- The company paid off its capital lease during 2015. No common stock sales were reported for FY2015; common shares outstanding were 46,136,326 at year-end and March 30, 2016.
Outlook, risks and other disclosures
- Management plans new product development, expansion of existing products, and pursuit of merger and acquisition opportunities. It stated that cash on hand and operating cash flow should fund operations for the next 12 months, while also saying additional funding is needed to finance growth and strategic objectives. Funding availability is not assured; management warns that insufficient funds could jeopardize operations.
- Revenue concentration is significant: two customers represented 32.39% and 15.24% of FY2015 revenue. The filing says the company is not solely dependent on one major customer.
- Management reports manufacturing capacity of approximately 100 amplifiers monthly, with outsourcing available for larger or time-sensitive orders. Five suppliers accounted for 57.06% of 2015 materials purchases; the largest represented 22.60%.
- The company reports no owned intellectual property other than its domain name and relies on contracts to protect proprietary information. It also identifies competition, regulatory change, and financing needs as business risks. No material pending legal proceedings or off-balance-sheet arrangements were reported.
- The filing’s internal-control discussion is inconsistent: management describes internal controls as effective, but also refers to material weaknesses in internal control over financial reporting without clearly identifying them in the provided text. The auditor did not provide an opinion on internal-control effectiveness.
- No dividends have been paid, and none are anticipated in the foreseeable future. The CEO’s Series A preferred shares carry 51% of total voting power; the CEO also holds an option to acquire additional Series A shares.
Important facts for investors to verify
- Whether the company’s stated 12-month operating liquidity remains adequate given modest working capital, demand-payable CEO advances, and its stated need for growth funding.
- The nature, severity and remediation status of the material weaknesses referenced in the internal-control disclosure.
- Customer concentration, order backlog conversion, and whether FY2015 revenue growth is repeatable.
- Terms and current balance of the variable-rate credit line, CEO advances, and other debt; also confirm the effect of preferred-stock voting rights and potential dilution.
- Whether the FY2014-to-FY2015 profit improvement reflects sustainable operating performance rather than primarily lower nonrecurring charges and interest expense.