AmpliTech Group, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Unaudited, consolidated results. The company designs and manufactures microwave amplifiers, components and related subsystems for satellite, aerospace, defense, government and commercial markets.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $1.024 million | $0.661 million | $1.497 million | $1.417 million |
| Gross profit | $344,623 | $225,988 | $399,605 | $465,302 |
| Gross margin | 33.6% | 34.2% | 26.7% | 32.9% |
| Operating loss | $698,927 | $216,469 | $1.553 million | $515,716 |
| Net loss | $472,695 | $243,268 | $1.353 million | $566,229 |
| Net loss per share | $0.05 | $0.10 | $0.19 | $0.23 |
Q2 revenue rose about 55%, with management citing increased sales in military, SATCOM, cryogenic and telecommunications markets as COVID-related restrictions eased. For the first half, revenue increased about 5.7%, but gross profit fell about 14% and gross margin declined. Higher cost of sales and sharply higher SG&A contributed to larger operating and net losses. Management attributed SG&A growth to compensation, investor and public relations, consulting, professional and offering-related costs, as well as recruiting, sales and R&D expenses. Approximately $370,000 of first-half expense was described as non-recurring and related to public offerings.
Cash, liquidity and debt
- June 30 cash and cash equivalents were $27.624 million, versus $199,536 at year-end 2020; working capital was $29.821 million, versus $741,606. Marketable securities were $1.110 million.
- Operating cash use was $1.621 million for the first half, compared with $266,736 in the prior-year period. Investing cash use was $1.673 million, including equipment, marketable securities and a private-company investment.
- Financing provided $30.718 million, primarily from common-stock offerings and warrant exercises. The company raised approximately $20.976 million net in an April private placement and $9.450 million net through its Nasdaq public offering and over-allotment.
- The $200,000 line of credit was repaid; its balance was zero at June 30. A term loan was paid off in May. Notes payable totaled $404,880, and finance and operating lease liabilities totaled $376,612.
- The SBA forgave the $232,200 PPP loan in April, recorded as a gain on extinguishment of debt. The filing reports $27.374 million of cash above FDIC insurance limits at June 30.
Developments, outlook and risks
- Shares and warrants began Nasdaq trading in February, following a 1-for-20 reverse stock split. Common shares outstanding increased from 4,839,448 at December 31, 2020 to 9,343,671 at June 30, 2021. The April financing also included warrants for 1,900,500 shares at $8.48; total warrants outstanding at quarter-end were 3,266,942.
- In June, the company agreed to acquire up to a 20% interest in SN2N, LLC for $350,000 in tranches. It had invested $150,000 for a 10% interest by quarter-end. AmpliTech expects to be the exclusive manufacturer of an amplifier product line associated with SN2N’s planned secure communications technology.
- Management said RFQ activity remained strong and expected easing business restrictions to support sales. It stated that cash on hand and operating cash would be sufficient for the next 12 months; no quantified revenue or earnings guidance was provided.
- COVID-19-related workforce constraints, customer communication difficulties and delivery delays could affect demand and results. Management also described growth plans in 5G/6G, wireless infrastructure, satellite, quantum computing and cybersecurity markets; these plans are forward-looking and not assured.
- Management concluded disclosure controls and procedures were not effective as of June 30, 2021. The filing reports no material changes to internal control over financial reporting, no pending legal proceedings known to the company, and no off-balance-sheet transactions.
Investor verification points
- Reconcile the filing’s share-count discrepancy: the balance sheet and cover report 9,343,671 shares at June 30, while one stockholders’ equity table states 9,337,671.
- Check the cash disclosures: the balance sheet reports $27.624 million in cash and cash equivalents, while the marketable-securities note separately states cash and cash equivalents of $3,888,974. The filing text does not explain this difference.
- Confirm first-half EPS data: the statements report a $566,229 net loss for the 2020 comparison period, while the EPS note lists $556,229 in one calculation.
- Assess the sustainability of revenue growth and gross margins, operating cash burn, and the company’s ability to convert strong RFQ activity into orders and cash flow.
- Evaluate dilution from the substantial 2021 share issuance and outstanding warrants, as well as the status, remaining funding obligations and commercial prospects of the SN2N investment.
- Monitor remediation of ineffective disclosure controls and the concentration of cash above FDIC-insured limits.