Amplitech Group, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparison is FY 2021. This filing provides annual, not standalone fourth-quarter, results.
Business context
AmpliTech designs and assembles RF amplifiers and microwave components for satellite communications, telecom, defense, space and other markets. Its businesses also include Specialty Microwave, Spectrum Semiconductor Materials (SSM), an MMIC design center in Texas, and the TGSS 5G systems division formed in August 2022. SSM was acquired in December 2021, so FY 2022 includes a much fuller contribution from that business than FY 2021.
Key financial results
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Revenue | $19.39 million | $5.28 million |
| Gross profit | $8.92 million | $1.29 million |
| Gross margin | 46.02% | 24.50% |
| SG&A | $7.63 million | $4.56 million |
| Research and development | $1.02 million | $1.83 million |
| Income (loss) from operations | $149,351 | $(5.11) million |
| Net loss | $(677,107) | $(4.76) million |
| Operating cash flow | $(3.43) million | $(2.20) million |
| Cash and cash equivalents at year-end | $13.29 million | $18.02 million |
Revenue rose 267.64%, primarily reflecting $13.52 million of SSM sales; AmpliTech Inc. sales were $5.87 million. Gross margin improved with the acquisition and higher-margin LNA sales. The company reported an $815,788 loss from an adjustment to the SSM revenue earnout, alongside the $120,136 goodwill impairment. The filing reports no income tax provision for either year.
At December 31, 2022, working capital was $20.33 million and accumulated deficit was $7.30 million. Total liabilities were $7.92 million, including $233,955 of notes payable, $82,816 of finance lease obligations, $4.36 million of operating lease obligations, and a $2.18 million revenue earnout liability. The earnout was paid on March 20, 2023. The company reported no outstanding balance on its line of credit at year-end; it closed that line and its equipment line in March 2023, releasing related liens and the CEO’s personal guarantee.
Changes, outlook and risks
- FY 2022 revenue growth is substantially acquisition-driven. The SSM business recorded $13.52 million in revenue and $2.88 million in segment net income; AmpliTech Inc. recorded a $2.48 million segment net loss.
- Cash declined by $4.73 million during the year. Operating activities used $3.43 million, investing activities used $1.08 million, and financing activities used $224,223.
- Management said cash on hand and expected operating cash flows should fund operations for the next 12 months. It also stated that core LNA and SSM products were expected to support FY 2023 activity without additional funding. These are forward-looking statements, not guarantees.
- The company is developing O-RAN-compliant radio systems and 5G/6G subsystems; deployment or market release was expected in late 2023 or early 2024. TGSS’s Open Radio Unit product was also described as targeting deployments in that timeframe.
- Management cited supply-chain constraints, component and freight inflation, and possible production and revenue delays extending into 2023 and 2024. Revenue depends largely on purchase orders rather than long-term commitments. One customer represented 18.41% of FY 2022 revenue; two suppliers represented 44.15% and 29.29% of component purchases.
- SG&A increased with acquisition integration, staffing, insurance, relocation and facility costs. The Hauppauge facility relocation more than tripled manufacturing capacity, according to the company.
- Management identified two material weaknesses in internal control over financial reporting: insufficient segregation of duties and ineffective controls over financial-statement disclosures. Disclosure controls were deemed ineffective at year-end. Management described planned remediation, including procedures, added training and personnel, dual payment authorization, and expense review.
- The independent auditor issued an unqualified opinion on the financial statements, but was not engaged to audit internal control effectiveness. The auditor identified goodwill impairment and long-lived asset recoverability as critical audit matters; the Specialty Microwave goodwill was fully impaired, while the filing reports no long-lived asset impairment.
- No pending legal proceedings were reported. The filing identifies no off-balance-sheet arrangements at year-end.
Important facts for investors to verify
- How much of future growth and profitability is expected from SSM versus AmpliTech’s amplifier and newer MMIC/5G offerings.
- Whether operating cash flow improves and management’s 12-month liquidity assessment remains valid after the earnout payment and continued investment needs.
- Whether supply constraints, customer concentration and the two major suppliers’ purchasing share affect production, delivery timing or margins.
- Progress on the O-RAN/5G product timetable and whether expected deployments or revenue materialize.
- Remediation and independent validation of the disclosed internal-control material weaknesses.
- The filing reports both $247,450 of marketable securities on the balance sheet and $2,006,749 of total marketable securities in a note; verify the classification and reconciliation. The note includes a $1,759,299 money market fund, while the balance sheet separately reports cash and cash equivalents.