Amplitech Group, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Unaudited consolidated results are compared with Q1 2022. The company designs and supplies microwave components and subsystems, and distributes semiconductor packaging materials; its activities also include MMIC development and 5G services.
Financial performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $4.11 million | $5.10 million |
| Gross profit / margin | $1.82 million / 44.17% | $2.32 million / 45.57% |
| Operating expenses | $2.44 million | $2.31 million |
| Operating income (loss) | $(619,111) | $8,985 |
| Net income (loss) | $(581,966) | $3,625 |
| Net loss per share | $(0.06) | $0.00 |
| Cash used in operating activities | $(652,506) | $(1.84) million |
Revenue fell $987,221, or 19.36%. Amplitech Inc. sales rose 14.42% to $1.22 million, while Spectrum sales declined 28.31% to $2.89 million. Gross margin decreased 1.40 percentage points. The company attributed Spectrum’s lower sales mainly to reduced international demand for IC packaging as pandemic-era supply constraints eased. SG&A increased 9.76% to $2.09 million, including higher investor relations, insurance, stock compensation, consulting, trade-show, marketing, rent and utility costs. R&D decreased 15.62% to $348,730.
By segment, Amplitech Inc. recorded a $1.01 million net loss, Spectrum generated $720,854 net income, and corporate operations recorded a $293,288 net loss. The segment table does not provide comparative 2022 revenue detail beyond the consolidated and segment figures presented in the filing.
Financial position and liquidity
- At March 31, 2023, cash and cash equivalents were $7.60 million, down from $13.29 million at year-end 2022. Working capital was $17.67 million, versus $18.15 million.
- Current assets were $19.66 million and current liabilities $2.00 million. Inventories were $6.57 million, net of a $1.13 million obsolescence reserve; accounts receivable were $1.86 million.
- Marketable securities were reported at $3.02 million on the balance sheet. The securities note separately lists $3.02 million of marketable equity securities and a $7,216 money-market balance; investors should verify the presentation and classification.
- Total liabilities were $5.72 million, including $4.21 million of operating lease obligations and $70,205 of financing lease obligations. Notes payable totaled approximately $192,633, including current and long-term portions; the $500,000 equipment line of credit was closed in March and related liens and the president’s personal guarantee were released.
- Cash used in investing activities was $2.81 million, principally $2.76 million invested in marketable securities. Cash used in financing activities was $2.23 million, including payment of the $2.18 million revenue earnout. Cash declined by $5.69 million overall.
Management stated that cash on hand and cash provided by operations should fund operations for the next 12 months. This is management’s expectation, not a guarantee. The filing reports no off-balance-sheet transactions.
Outlook, risks and notable items
- Management said Spectrum’s request-for-quote activity remained strong and expected it to translate into higher sales in subsequent quarters; no numerical guidance was provided.
- The company is investing in 5G, MMIC, satellite, defense and related markets, and describes strategic partnerships, joint ventures and acquisitions as part of its growth ambitions. These plans are forward-looking and subject to execution and market risks.
- The filing identifies potential continuing COVID-19-related supply-chain and operating disruptions. It also notes that easing supply constraints reduced Spectrum’s prior elevated IC-packaging demand.
- Disclosure controls and procedures were assessed as not effective as of March 31, 2023. Management reported no material changes in internal control over financial reporting during the quarter.
- Subsequent events: the Ronkonkoma lease was terminated on April 13, 2023; on April 17, the company signed an agreement to distribute NGK Electronics Devices’ RF microwave products in the United States.
- The company reported no pending legal proceedings to its knowledge, no defaults upon senior securities and no unregistered equity sales during the period. It did not provide an updated risk-factor discussion because it is a smaller reporting company.
Investor verification priorities
- Track whether Spectrum’s RFQ activity converts into orders and revenue, especially from international customers, and whether Amplitech Inc.’s sales growth continues.
- Assess the cash decline, operating cash burn and management’s 12-month liquidity assertion; distinguish cash from marketable securities and confirm their availability and classification.
- Verify the terms and financial effects of the earnout payment, lease obligations and post-quarter lease termination.
- Monitor gross margins, SG&A growth and the company’s ability to return to operating profitability.
- Seek updates on remediation of ineffective disclosure controls and confirm the exact goodwill carrying value: the balance sheet reports $4,696,883, while a note states $4,698,883.