Amplitech Group, Inc. — FY2014 Form 10-K
Reporting period: Fiscal year ended December 31, 2014; comparative figures are for FY2013. The filing was signed March 30, 2015. AmpliTech designs and assembles customer-specific RF/microwave amplifiers and related components and subsystems.
Financial performance and position
| Metric | FY2014 / year-end | FY2013 / comparison |
|---|---|---|
| Revenue | $1,276,111 | $1,222,511 |
| Gross profit / margin | $613,055 / approximately 48% | $643,411 / approximately 53% |
| Operating loss | $70,830 | $11,629 |
| Net loss | $770,070; $0.02 per share | $144,494; $0.01 per share |
| Interest expense | $200,120 | $85,765 |
| Cash from (used in) operations | $(53,811) | $(188,519) |
| Cash from financing | $62,350 | $171,426 |
| Cash and cash equivalents | $19,162 | $10,623 |
| Working capital | Deficit of $30,145 | Deficit of approximately $323,897, based on reported balance-sheet totals |
| Total assets / liabilities | $444,463 / $353,390 | $533,734 / $753,977 |
| Stockholders’ equity (deficit) | $91,073 | $(220,243) |
Changes and notable items
- Revenue grew 4.4%, but cost of goods sold rose 14.5%; management attributed the margin decline to outsourcing a large, time-sensitive order.
- General and administrative expense increased 4.4% to $683,885, including public-company investor relations, legal, accounting and consulting costs.
- Net loss widened substantially, driven in part by higher interest expense and a $501,200 noncash compensation charge tied to Series A preferred stock issued to the CEO. The CEO returned 139,000 of the 140,000 shares before year-end.
- Cash used in operations improved year over year, while financing included $200,000 from common-stock sales. Common shares outstanding rose from 22.2 million to 46.1 million during 2014, including shares issued in note conversions.
- Year-end current liabilities were $353,390, including $68,836 of factor financing, $26,958 of notes payable, $23,886 of capital leases and amounts due to the officer. Convertible notes payable were zero at year-end after conversions.
Outlook, risks and governance
- The auditor’s report includes a going-concern warning: recurring losses, a working-capital deficit and accumulated deficit of $1,587,040 raise substantial doubt about the company’s ability to continue. The statements include no adjustments for a possible failure to continue as a going concern.
- Management plans to seek additional capital through debt or equity, pursue new customers, develop products and expand distribution. It also described plans for product-line expansion and potential mergers and acquisitions. Success and funding availability are not assured.
- Management stated that cash on hand and operating cash flow should provide sufficient working capital for the next 12 months, while also stating that additional funding is required. This should be considered alongside the going-concern warning.
- Customer concentration is significant: one customer accounted for 47.13% of 2014 revenue. The company reported five full-time and one part-time employee and estimated assembly capacity of about 100 amplifiers monthly.
- Series A preferred shares carry 51% of total voting power. The CEO also received an option to purchase 400,000 preferred shares, each convertible into 100 common shares; the filing describes this as an immediately exercisable option. This creates substantial control and potential dilution considerations.
- The company reported no material pending litigation or off-balance-sheet arrangements. It has no audit, compensation or nominating committee; the sole director is not independent. Management concluded that disclosure controls and internal control over financial reporting were effective.
Investor verification priorities
- Confirm available financing, cash runway and whether management’s 12-month liquidity expectation remains supportable given the auditor’s going-concern warning.
- Reconcile the officer-loan balance: the balance sheet reports $46,291, while parts of the narrative report $46,921 after a $10,000 repayment from $56,291.
- Review the Series A issuance, returned shares and preferred-stock option terms, including voting control, conversion rights, valuation and potential dilution.
- Assess customer concentration, order pipeline and the effect of outsourced production on gross margins and delivery capacity.
- Review convertible-note conversion terms and share issuance history, and verify current shares outstanding and any remaining anti-dilution rights.