Amplitech Group, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited consolidated results compared with Q1 2020. AmpliTech designs and assembles microwave amplifiers and related components; its Specialty Microwave division makes passive microwave components and subsystems. Common stock and warrants began trading on Nasdaq in February 2021 after a 1-for-20 reverse split.
Key financial results
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $472,974 | $755,948 |
| Gross profit / margin | $54,981 / 11.6% | $239,314 / 31.7% |
| SG&A | $908,554 | $538,561 |
| Operating loss | $(853,573) | $(299,247) |
| Net loss | $(879,931) | $(322,961) |
| Basic and diluted loss per share | $(0.16) | $(0.13) |
| Operating cash flow | $(658,991) | $(76,195) in cash flow statement |
At March 31, cash and cash equivalents were $9.86 million, versus $199,536 at year-end 2020; working capital was $10.45 million, versus $741,606. Total assets were $12.66 million and stockholders’ equity $10.20 million. Current liabilities were $829,134. Notes payable totaled approximately $1.56 million; the $200,000 line-of-credit balance at year-end had been repaid, leaving none outstanding. Finance lease liabilities were $75,368 and operating lease liabilities $329,836. The company reported an accumulated deficit of $2.75 million.
Cash used in investing activities was $15,000, primarily for equipment. Financing activities provided $10.33 million, including $9.45 million net proceeds from the public offering and $1.13 million from warrant exercises. Cash rose by $9.66 million during the quarter.
Changes and management commentary
- Revenue declined 37.4% year over year. Management attributed lower sales to a COVID-related January shutdown, reduced workforce availability, shipment delays, and continuing supply-chain disruption.
- Gross profit fell 77%, and margin contracted to 11.6% from 31.7%, as lower shipments left fixed production costs spread over less revenue. Management also cited increased salary costs following an operations-director hire.
- SG&A rose 68%. Management attributed about $200,000 of added parent-company costs to stock compensation, directors’ insurance, professional fees, and Nasdaq offering and regulatory expenses; it said most were non-recurring.
- Management reported approximately $2 million in backlog and strong request-for-quote activity, expecting these to support increased sales in Q2 and Q3 2021. This is an expectation, not formal financial guidance.
- Management stated that cash on hand and operating cash flow should fund operations for the next 12 months. The filing also highlights uncertainty around COVID-19 impacts, customer and supplier operations, delivery delays, and the company’s ability to meet demand.
Capital, subsequent events, and other notable items
- The February Nasdaq offering sold 1,371,428 units at $7 per unit, with each unit comprising one common share and one warrant; an overallotment added 205,714 shares and warrants. By March 31, 161,800 warrants had been exercised at $7, generating $1.13 million. The company had 1,415,342 warrants outstanding at quarter-end.
- After quarter-end, 48,900 additional warrants were exercised for $342,300. On April 16, the company closed a registered direct offering of 2,715,000 shares and a concurrent private placement of warrants for 1,900,500 shares, both at an $8.48 exercise/purchase price; gross proceeds were approximately $23 million before fees and expenses. As of May 12, 9,343,671 common shares were issued and outstanding.
- The SBA approved forgiveness of the $232,200 PPP loan on April 20. On May 10, the company repaid its seven-year term loan, reporting payment of $883,416 principal plus interest.
- Management concluded disclosure controls and procedures were not effective as of March 31, 2021. No material change in internal control over financial reporting was reported for the quarter. The company reported no pending legal proceedings and no applicable commitments or contingencies.
Important facts for investors to verify
- Whether the approximately $2 million backlog converts to shipments and revenue as expected, given continuing supply-chain and staffing constraints.
- Whether margins recover as volumes rise, and whether SG&A declines after offering-related costs.
- The remediation plan and progress for the disclosed ineffective disclosure controls and procedures.
- The dilutive effects of the offerings, outstanding warrants, and subsequent warrant exercises; confirm current share count and any further financing.
- Cash-flow comparison: the cash flow statement reports Q1 2020 operating cash use of $76,195, while MD&A cites $76,915. The filing does not explain this difference.
- Cash concentration risk: $8,855,238 was reported in excess of FDIC-insured limits at March 31, 2021.