AmpliTech 10Q 2022 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number 001-40069

AmpliTech Group, Inc.

(Exact name of registrant as specified in its charter)

Nevada		27-4566352
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

155 Plant Avenue

Hauppauge, NY 11788

(Address of principal executive offices) (Zip Code)

(631)-521-7831

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on

which registered

Common Stock, par value $0.001 per share

AMPG

The Nasdaq Stock Market LLC

Warrants to Purchase Common Stock

AMPGW

The Nasdaq Stock Market LLC

Indicate by check mark whether registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 9, 2022, the registrant had 9,632,113 shares of common stock, par value $0.001 per share, issued and outstanding.

AMPLITECH GROUP, INC.

QUARTERLY REPORT ON FORM 10-Q

September 30, 2022

TABLE OF CONTENTS

Table of Contents

Use of Certain Defined Terms

Except as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our Company”, “the Company”, “AmpliTech”, “Specialty” or “SMW” “Spectrum” or “SSM”, “AmpliTech Group MMIC Design Center” or “AGMDC”, “AmpliTech Group True G Speed Services” or “TGSS” are the combined business of AmpliTech Group, Inc., and its consolidated subsidiary, AmpliTech, Inc. and AMPG’s divisions Specialty Microwave, Spectrum Semiconductor Materials, AmpliTech Group MMIC Design Center and AmpliTech Group True G Speed Services.

Table of Contents

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

We cannot predict all the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved, and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Quarterly Report on Form 10-Q and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Considering these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements concerning other matters addressed in this Quarterly Report on Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Quarterly Report on Form 10-Q.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

AmpliTech Group, Inc.

Condensed Consolidated Balance Sheets

	September 30,			December 31,
	2022			2021
	(Unaudited)
Assets
Current Assets
Cash and cash equivalents	$	13,054,956		$	18,018,874
Accounts receivable, net		2,667,433			1,659,878
Other Receivable		6,599			201,215
Inventories, net		6,253,951			4,192,812
Marketable Securities		493,323			-
Prepaid expenses		147,031			210,028
Total Current Assets		22,623,293			24,282,807

Property and equipment, net		2,078,983			1,355,288
Right of use operating lease assets		4,346,815			1,115,588
Intangible assets, net		3,171,685			3,284,082
Goodwill		4,817,019			4,817,019
Cost method investment		348,250			250,000
Security deposits		121,217			122,404

Total Assets	$	37,507,262		$	35,227,188

Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses		1,554,656		$	3,006,334
Customer deposits		128,435			253,909
Current portion of financing lease obligations		41,865			33,688
Current portion of operating lease obligations		575,816			391,571
Current portion of notes payable		152,135			129,876
Total Current Liabilities		2,452,907			3,815,378

Long Term Liabilities
Financing lease, net of current obligations		53,412			17,471
Operating lease, net of current obligations		3,918,623			795,317
Notes payable, net of current portion		126,096			200,491
Revenue earnout		1,365,038			1,365,038
Total Liabilities		7,916,076			6,193,695

Commitments and Contingencies		-			-

Stockholders' Equity
Series A convertible preferred stock, par value $0.001, 1,000,000 shares authorized, 0 shares issued and outstanding		-			-
Common Stock, par value $0.001, 500,000,000 shares authorized, 9,632,113 and 9,582,113 shares issued and outstanding, respectively		9,632			9,582
Additional paid-in capital		35,997,730			35,651,088
Accumulated deficit		(6,416,176	)		(6,627,177	)

Total Stockholders' Equity		29,591,186			29,033,493

Total Liabilities and
Stockholders' Equity	$	37,507,262		$	35,227,188

See accompanying notes to the condensed consolidated financial statements

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AmpliTech Group, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

	For The Three Months Ended						For The Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2022			2021			2022			2021

Revenue	$	5,435,654		$	1,056,596		$	15,119,216		$	2,553,982

Cost of goods sold		2,774,739			742,983			8,096,984			1,840,764

Gross Profit		2,660,915			313,613			7,022,232			713,218

Operating Expenses
Selling, general and administrative		1,852,345			833,574			5,975,440			2,763,292
Research and development		222,549			16,755			811,688			39,142
Total operating expenses		2,074,894			850,329			6,787,128			2,802,434

Income (Loss) From Operations		586,021			(536,716	)		235,104			(2,089,216	)

Other Income (Expenses)
Gain on extinguishment of debt		-			-			-			232,200
Other income		-			11,520			-			11,520
Unrealized gain (loss) on investments		213			(63,807	)		213			(63,135	)
Interest expense, net		(9,318	)		(3,842	)		(24,316	)		(36,840	)
Total other income (expense)		(9,105	)		(56,129	)		(24,103	)		143,745

Income (Loss) Before Income Taxes		576,916			(592,845	)		211,001			(1,945,471	)

Provision For Income Taxes		-			-			-			-

Net Income (Loss)	$	576,916		$	(592,845	)	$	211,001		$	(1,945,471	)

Net Income (Loss) Per Share;
Basic	$	0.06		$	(0.06	)	$	0.02		$	(0.25	)
Diluted	$	0.06		$	(0.06	)	$	0.02		$	(0.25	)

Weighted Average Shares Outstanding;
Basic		9,630,739			9,343,671			9,601,084			7,939,008
Diluted		9,712,756			9,343,671			9,716,868			7,939,008

See accompanying notes to the condensed consolidated financial statements

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AmpliTech Group, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	For The Nine Months Ended
	September 30, 2022			September 30, 2021

Cash Flows from Operating Activities:
Net income (loss)	$	211,001		$	(1,945,471	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		293,460			94,295
Amortization of prepaid consulting		40,389			148,390
Amortization of right-of-use operating lease asset		381,921			68,278
Stock based compensation		346,692			214,661
Loss on disposal of property and equipment		1,606			7,188
Gain on forgiveness of debt		-			(232,200	)
Change in fair value of marketable securities		(213	)		63,135
Changes in Operating Assets and Liabilities:
Accounts receivable		(1,007,555	)		(132,681	)
Other receivable		194,616			-
Inventories		(2,061,139	)		(431,174	)
Prepaid expenses		(28,036	)		(707,970	)
Security deposits		1,187			-
Accounts payable and accrued expenses		(1,451,678	)		208,965
Operating lease liability		(305,597	)		(66,692	)
Customer deposits		(125,474	)		196,767
Net cash used in operating activities		(3,508,820	)		(2,514,509	)

Cash Flows from Investing Activities:
Purchase of equipment		(696,253	)		(948,123	)
Purchase of marketable securities, net		(493,110	)		(4,215,724	)
Purchase of cost method investment		(98,250	)		(250,000	)
Net cash used in investing activities		(1,287,613	)		(5,413,847	)

Cash Flows from Financing Activities:
Proceeds received from private placement, net of expenses		-			20,976,344
Proceeds received from public offering, net of expenses		-			9,449,597
Proceeds received from exercise of warrants		-			1,474,899
Repayment of line of credit		-			(200,000	)
Repayments on financing lease		(32,734	)		(23,916	)
Proceeds of note payable		441,139			-
Repayment of notes payable		(575,890	)		(1,000,231	)
Net cash (used in) provided by financing activities		(167,485	)		30,676,693

Net change in cash and cash equivalents		(4,963,918	)		22,748,337

Cash and Cash Equivalents, Beginning of Period		18,018,874			199,536

Cash and Cash Equivalents, End of Period	$	13,054,956		$	22,947,873

Supplemental disclosures:
Cash paid for interest expense	$	33,836		$	45,175
Cash paid for income taxes	$	-		$	-

Non-Cash Investing and Financing Activities:
Common Stock issued on vesting of RSUs	$	50		$	-
Finance agreement entered in exchange for prepaid assets		-			32,222
Equipment received for prepaid assets	$	50,644		$	-
Operating lease right-of-use asset and liability initial measurement		3,626,985			-
Financed purchases of property and equipment	$	145,630		$	-
Loss on disposal of property and equipment	$	1,606		$	-

See accompanying notes to the condensed consolidated financial statements

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AmpliTech Group, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited)

	For The Three Months Ended September 30, 2022
	Series A Convertible Preferred				Common Stock				Additional						Total
	Number of		Par		Number of		Par		Paid-In			Accumulated			Stockholders'
	Shares		Value		Shares		Value		Capital			Deficit			Equity
Balance, June 30, 2022		-	$	-		9,629,613	$	9,630	$	35,933,313		$	(6,993,092	)	$	28,949,851

Stock based compensation		-		-		-		-		64,419			-			64,419

Common stock issued for vesting of RSU's		-		-		2,500		2		(2	)		-			-

Net income for the three months ended September 30, 2022		-		-		-		-		-			576,916			576,916

Balance September 30, 2022		-	$	-		9,632,113	$	9,632	$	35,997,730		$	(6,416,176	)	$	29,591,186

	For The Nine Months Ended September 30, 2022
	Series A Convertible Preferred				Common Stock				Additional						Total
	Number of		Par		Number of		Par		Paid-In			Accumulated			Stockholders'
	Shares		Value		Shares		Value		Capital			Deficit			Equity
Balance, December 31, 2021		-	$	-		9,582,113	$	9,582	$	35,651,088		$	(6,627,177	)	$	29,033,493

Stock based compensation		-		-		-		-		346,692			-			346,692

Common stock issued for vesting of RSU's		-		-		50,000		50		(50	)		-			-

Net income for the nine months ended September 30, 2022		-		-		-		-		-			211,001			211,001

Balance September 30, 2022		-	$	-		9,632,113	$	9,632	$	35,997,730		$	(6,416,176	)	$	29,591,186

For The Three Months Ended September 30, 2021

Series A Convertible Preferred

Common Stock

Additional

Total

Number of

Par

Number of

Par

Paid-In

Accumulated

Stockholders'

Shares

Value

Shares

Value

Capital

Deficit

Equity

Balance. June 30, 2021

9,343,671

9,344

34,388,700

(3,220,998

)

31,177,046

Stock based compensation

26,111

Net loss for the three months ended September 30, 2021

(592,845

)

(592,845

)

Balance September 30, 2021

9,343,671

9,344

34,414,811

(3,813,843

)

30,610,312

	For The Nine Months Ended September 30, 2021
	Series A Convertible Preferred				Common Stock				Additional						Total
	Number of		Par		Number of		Par		Paid-In			Accumulated			Stockholders'
	Shares		Value		Shares		Value		Capital			Deficit			Equity
Balance, December 31, 2020		-		-		4,839,448	$	4,839	$	2,303,815		$	(1,868,372	)	$	440,282

Common stock issued in private placement		-		-		2,715,000		2,715		20,973,629			-			20,976,344

Common stock issued in public offering		-		-		1,577,142		1,578		9,448,019			-			9,449,597

Additional shares issued in connection to reverse split due to rounding		-		-		1,381		1		(1	)		-			-

Common stock issued upon exercise of warrants		-		-		210,700		211		1,474,688			-			1,474,899

Stock based compensation		-		-		-		-		214,661			-			214,661

Net loss for the nine months ended September 30, 2021		-		-		-		-		-			(1,945,471	)		(1,945,471	)

Balance September 30, 2021		-		-		9,343,671	$	9,344	$	34,414,811		$	(3,813,843	)	$	30,610,312

See accompanying notes to the condensed consolidated financial statements

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

(1) Organization and Business Description

AmpliTech Group, Inc. (“AmpliTech” or the “Company”) was incorporated under the laws of the State of Nevada on December 30, 2010. On August 13, 2012, the Company acquired AmpliTech, Inc., by issuing 833,750 shares of the Company’s common stock to the shareholders of AmpliTech, Inc. in exchange for 100% of the outstanding shares of AmpliTech Inc. (the “Share Exchange”). After the Share Exchange, the selling shareholders owned 60,000 shares of the outstanding 889,250 shares of Company common stock, resulting in a change in control. Accordingly, the transaction was accounted for as a reverse acquisition in which AmpliTech, Inc. was deemed to be the accounting acquirer, and the operations of the Company were consolidated for accounting purposes. The capital balances have been retroactively adjusted to reflect the reverse acquisition.

AmpliTech designs, engineers and assembles microwave component based low noise amplifiers (“LNA”) that meet individual customer specifications. Application of the Company’s proprietary technology results in maximum frequency gain with minimal background noise distortion as required by each customer. The Company has both domestic and international customers in such industries as aerospace, governmental, defense and commercial satellite.

On September 12, 2019, AmpliTech Group, Inc. acquired the assets of Specialty Microwave Corporation (“Specialty”), a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and all intellectual property. The assets also included all eight team members of Specialty.

Specialty designs and manufactures passive microwave components and related subsystems that meet individual customer specifications for both domestic and international customers for use in satellite communication ground networks.

On February 17, 2021, AmpliTech Group, Inc., common stock and warrants under the symbols “AMPG” and “AMPGW”, respectively, commenced trading on NASDAQ. A reverse split of the outstanding common stock at a 1-for-20 ratio became effective February 17, 2021 as of 12:01 a.m., Eastern Time. In connection with the public offering, 1,371,428 units at an offering price of $7.00 per unit were sold. Each unit issued in the offering consisted of one share of common stock and one warrant.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

On November 19, 2021, AmpliTech Group, Inc. entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Spectrum Semiconductor Materials Inc. (the “Seller” or “SSM”), pursuant to which AmpliTech would acquire substantially all the assets of the Company (the “Acquisition”). The Acquisition was completed on December 15, 2021.

Spectrum Semiconductor Materials (“SSM”), located in Silicon Valley (San Jose, CA), is a global authorized distributor of integrated circuit (“IC”) packaging and lids for semiconductor device assembly, prototyping, testing, and production requirements.

IC packaging is the case or enclosure that contains the semiconductor device to protect it from corrosion or physical damage; the IC packaging also supports the electrical contacts, which connect the semiconductor device to a circuit board. IC packaging often gets sealed with lids, which creates an airtight seal to prevent contaminants, particles, liquids, or gases from entering the packaging to ensure the proper operation of the device. The Company offers multiple IC packaging and lids product lines according to desired product specifications, device performance, dimensions, resistances, and tolerances.

Our IC packaging and lids products serve a global customer base in a wide range of end-market applications, including aerospace, defense, industrial, medical, wireless, communications, automotive, and other growing markets. The Company is ISO 9001:2015 and AS9120B certified for the Distribution of Semiconductor Materials for the Assembly Phase of Integrated Circuit Manufacturing, as well as in compliance with the Conflict Minerals Reporting Template (“CMRT”), the European Union’s Restriction of Hazardous Substances (“RoHS”) and Registration, Evaluation, Authorization, and Restriction of Chemicals (“REACH”) directives, as well as registered with the U.S. Government’s System for Award Management (“SAM”).

In August 2022, AmpliTech Group True G Speed Services (“TGSS”) division was formed to enable “true G speeds” to the industry. TGSS’ main function will be to plan and configure 5G radio systems and make them Oran Radio Access Network compliant. TGSS will implement AmpliTech’s low noise amplifier devices in these systems to promote greater coverage, longer range and faster speeds.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

The COVID-19 Pandemic

The global health crisis caused by the novel coronavirus COVID-19 pandemic and its resurgences has and may continue to negatively impact global economic activity, which, despite progress in vaccination efforts, remains uncertain and cannot be predicted with confidence. In addition, variants of COVID-19, including Delta and Omicron, continue to emerge, the impact of which cannot be predicted at this time, and could depend on numerous factors, including vaccination rates among the population, the effectiveness of the COVID-19 vaccines against COVID-19 variants along with the response by governmental bodies and regulators. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the COVID-19 pandemic on our business. Many countries around the world have continued to impose quarantines and restrictions on travel and mass gatherings to slow the spread of the virus. Accordingly, our ability to continue to operate our business may also be limited. Such events may result in a period of business, supply and manufacturing disruptions, and in reduced operations, any of which could materially affect our business, financial condition and results of operations. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. We continue to monitor the impacts of COVID-19 on the global economy and on our business operations. Although we expect the vaccinations for COVID-19 will continue to improve conditions, the ultimate impact from COVID-19 on our business operations and financial results will depend on, among other things, the ultimate severity and scope of the pandemic, including the new variants of the virus, the pace at which governmental and private travel restrictions and public concerns about public gatherings will ease, the rate at which historically large increases in unemployment rates will decrease, if at all, and whether, and the speed with which, the economy recovers. We are not able to fully quantify the impact that these factors will have on our business, but developments related to COVID-19 may materially affect financial condition and results of operations in future periods.

(2) Summary of Significant Accounting Policies

Basis of Accounting

The accompanying condensed consolidated financial statements have been prepared using the accrual basis of accounting.

The accompanying unaudited interim condensed consolidated financial statements of AmpliTech Group, Inc. (“Group” or the “Company”) have been prepared by management in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for annual audited financial statements. In the opinion of management, all adjustments of a normal recurring nature, considered necessary for a fair presentation have been included.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes related thereto for the years ended December 31, 2021 and 2020 included in Form 10-K filed with the SEC filed on March 31, 2022.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods presented. Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to the prior years’ financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations.

Cash and Cash Equivalents

The Company considers deposits that can be redeemed on demand and investments and marketable securities that have original maturities of less than three months, when purchased, to be cash equivalents. As of September 30, 2022, the Company’s cash and cash equivalents were deposited in four financial institutions.

Accounts Receivable

Trade accounts receivables are recorded at the net invoice value and are not interest bearing.

The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience and a review of the status of accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change in the future. An allowance of $0 and $39,380 has been recorded at September 30, 2022 and December 31, 2021.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

Employee Retention Credit

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provided an employee retention credit which was a refundable tax credit against certain employment taxes. New legislation amended the employee retention credit to be equal to 70% of qualified wages paid to employees after December 31, 2020, and before January 1, 2022. During calendar year 2021, a maximum of $10,000 in qualified wages for each employee per qualifying calendar quarter may be counted in determining the 70% credit. Therefore, the maximum tax credit that can be claimed by an eligible employer is $7,000 per employee per qualifying calendar quarter of 2021. The Company qualifies for the employee retention credit for quarters that experience a significant decline in gross receipts, defined as quarterly gross receipts that are less than 80 percent of its gross receipts for the same calendar quarter in 2019. The Company qualified for the credit beginning on January 1, 2021 and received credits for qualified wages through June 30, 2021. The Company recorded, as Other Receivable, an employee retention credit totaling $201,215 at December 31, 2021. As of September 30, 2022, $194,615 has been collected.

Marketable Securities

The Company’s investments in marketable securities are classified based on the nature of the securities and their availability for use in current operations. The Company’s marketable securities are stated at fair value with all realized and unrealized gains and losses on investments in marketable equity securities recognized in other income, net. The realized and unrealized gains and losses on marketable securities are determined using specific identification method.

Inventories

Inventories, which consist primarily of raw materials, work in progress and finished goods, is stated at the lower of cost (first-in, first-out basis) or market (net realizable value).

Inventory quantities and related values are analyzed at the end of each fiscal quarter to determine those items that are slow moving and obsolete. An inventory reserve is recorded

for those items determined to be slow moving with a corresponding charge to cost of goods sold. Inventory items that are determined obsolete are written off currently with a corresponding charge to cost of goods sold.

As of September 30, 2022 and December 31, 2021, the reserve for inventory obsolescence was $1,114,000 and $1,031,986, respectively.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements.

Property and equipment are depreciated as follows:

Description	Useful Life	Method
Office equipment	7 years	Straight-line
Machinery/shop equipment	5 to 10 years	Straight-line
Computer equipment/software	1 to 7 years	Straight-line
Vehicles	5 years	Straight-line

Long-lived assets

Long lived assets, such as property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Circumstances which could trigger a review include, but are not limited to; significant decrease in the market price of the asset; significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses, or a forecast of continuing losses associated with the use of the asset, and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount of fair value less costs to sell and would no longer be depreciated. The depreciable basis of assets that are impaired and continue in use is their respective fair values.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

Investment Policy-Cost Method

Investments consist of non-controlling equity investments in privately held companies. The Company elected the measurement alternative for these investments without readily determinable fair values and for which the Company does not control or have the ability to exercise considerable influence over operating and financial policies. These investments are accounted for under the cost method of accounting. Under the cost method of accounting, the non-marketable equity securities are carried at cost less any impairment, adjusted for observable price changes of similar investments of the same issuer. Fair value is not estimated for these investments if there are no identified events or changes in circumstances that may influence the fair value of the investment. Under this method, the Company’s share of the earnings or losses of such investee companies is not included in the consolidated balance sheet or consolidated statements of operations. The Company held $348,250 of investments without readily determinable fair values at September 30, 2022 (see Note 10). These investments are included in other assets on the condensed consolidated balance sheets. There were no indicators of impairment during the nine months ended September 30, 2022.

Goodwill and Intangible Assets

Intangible assets include goodwill, trademarks, intellectual property and customer base acquired through the asset purchases of Specialty and Spectrum. The Company accounts for Other Intangible Assets under the guidance of ASC 350, “Intangibles-Goodwill and Other.” Under the guidance, other intangible assets with definite lives are amortized over their estimated useful lives. Intangible assets with indefinite lives are tested annually for impairment. Goodwill is not amortized. We test goodwill balances for impairment annually at December 31 or whenever impairment indicators arise.

Leases

We lease property and equipment under finance and operating leases. For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the lease term. The Company has elected not to separate lease and non-lease components for all property leases for the purpose of calculating ROU assets and lease liabilities. Many of our leases include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when appropriate. When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis considering such factors as lease term and economic environment risks.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

Revenue Recognition

We sell our products through a combination of a direct sales force in the United States and independent sales representatives in international markets. Revenue is recognized when a customer obtains control of promised goods based on the consideration we expect to receive in exchange for these goods. This core principle is achieved through the following steps:

Identify the contract with the customer. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We do not have significant costs to obtain contracts with customers. For commissions on product sales, we have elected the practical expedient to expense the costs as incurred.

Identify the performance obligations in the contract. Our contracts with customers do not include multiple performance obligations to be completed over a period.

Our performance obligations relate to delivering single-use products to a customer, subject to the shipping terms of the contract. Limited warranties are provided, under which we typically accept returns and provide either replacement parts or refunds.

We do not have significant returns. We do not typically offer extended warranty or service plans.

Determine the transaction price. Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. None of our contracts as of September 30, 2022 contained a significant financing component. Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns, rebates, discounts, and other adjustments. The estimates of variable consideration are based on historical payment experience, historical and projected sales data, and current contract terms. Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.

Allocate the transaction price to performance obligations in the contract. We typically do not have multiple performance obligations in our contracts with customers. As such, we generally recognize revenue upon transfer of the product to the customer’s control at contractually stated pricing.

Recognize revenue when or as we satisfy a performance obligation. We generally satisfy performance obligations at a point in time upon either shipment or delivery of goods, in accordance with the terms of each contract with the customer. We do not have significant service revenue.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

Research and Development

Research and development expenditures are charged to operations as incurred. The major components of research and development costs include consultants, outside service, and supplies.

Research and development costs for the three months ended September 30, 2022 and 2021 were $222,549 and $16,755, respectively. Research and development costs for the nine months ended September 30, 2022 and 2021 were $811,688 and $39,142 respectively. For financial reporting purposes, research and development costs of $16,755 and $39,142 was reclassed from selling and administrative expense for the three and nine months ended September 30, 2021.

Income Taxes

The Company’s deferred tax assets and liabilities for the expected future tax consequences of events have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of certain assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At September 30, 2022, the Company had no material unrecognized tax benefits.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

Earnings Per Share

Basic earnings per share (“EPS”) are determined by dividing the net earnings by the weighted-average number of shares of common shares outstanding during the period. Diluted EPS is determined by dividing net earnings by the weighted average number of common shares used in the basic EPS calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding under the treasury stock method. As of September 30, 2022 and 2021, there were 3,599,942 and 3,386,442, respectively, potentially dilutive shares that need to be considered as common share equivalents. As a result of the net loss, the potentially dilutive shares that need to be considered as common share equivalents for the period ended September 30, 2021 are anti-dilutive.

The computation of weighted average shares outstanding and the basic and diluted earnings per share consisted of the following:

	Net Income (Loss)			Shares		Per Share Amount
For the three months ended September 30, 2022:
Basic EPS	$	576,916			9,630,739	$	0.06
Effect of dilutive stock options and warrants		-			82,017
Diluted EPS	$	576,916			9,712,756	$	0.06
For the three months ended September 30, 2021:
Basic EPS	$	(592,845	)		9,343,671	$	(0.06	)
Effect of dilutive stock options and warrants		-			-
Diluted EPS	$	(592,845	)		9,343,671	$	(0.06	)

	Net Income (Loss)			Shares		Per Share Amount
For the nine months ended September 30, 2022:
Basic EPS	$	211,001			9,601,084	$	0.02
Effect of dilutive stock options and warrants		-			115,602
Diluted EPS	$	211,001			9,716,686	$	0.02
For the nine months ended September 30, 2021:
Basic EPS	$	(1,945,471	)		7,939,008	$	(0.25	)
Effect of dilutive stock options and warrants		-			-
Diluted EPS	$	(1,945,471	)		7,939,008	$	(0.25	)

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

Fair Value Measurements

The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined in the following three categories:

Level 1: Unadjusted quoted prices that are available in active markets for identical assets or liabilities at the measurement date.

Level 2: Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly.

Level 3: Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment.

Cash and cash equivalents, receivables, inventory, prepaid expenses, accounts payable, accrued expenses, and customer deposits approximate fair value, due to their short-term nature. The carrying value of notes payable and short and long-term debt also approximates fair value since these instruments bear market rates of interest.

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to long-lived assets, intangible assets, and goodwill, which are remeasured when the derived fair value is below carrying value in the consolidated balance sheets.

Stock-Based Compensation

The Company records stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employees required service period, which is generally the vesting period.

Concentration of Credit Risk

Financial instruments that potentially subject the company to concentration of credit risk consist primarily of cash and accounts receivable.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At September 30, 2022 and December 31, 2021, the Company had $12,054,956 and $17,018,874 in excess of the FDIC insured limit, respectively.

The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses. Therefore, management does not believe significant credit risks exist at September 30, 2022.

Recent Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU amends ASC 805 to require acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in business combinations. The ASU is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on our consolidated financial statements.

In June 2016, the FASB issued Accounting Standard Update (ASU) 2016-13, Financial Instruments-Credit Losses (Topic 326). This ASU represents a significant change in the ACL accounting model by requiring immediate recognition of management’s estimates of current expected credit losses (CECL). The ASU is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on our consolidated financial statements.

We do not expect the adoption of these or other recently issued accounting pronouncements to have a significant impact on our results of operation, financial position or cash flow.

(3) Revenues

The following table presents sales disaggregated based on geographic regions and for the three and nine months ended:

AmpliTech Inc.

	For the three months ended				For the nine months ended
	Sept. 30,		Sept.30,		Sept. 30,		Sept. 30,
	2022		2021		2022		2021

Domestic sales	$	1,620,220	$	846,577	$	3,767,513	$	2,106,717
International sales		384,000		210,019		741,156		447,265
Total sales	$	2,004,220	$	1,056,596	$	4,508,669	$	2,553,982

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

	For the three months ended		For the nine months ended
Spectrum	Sept. 30, 2022		Sept. 30, 2022
Domestic sales	$	2,015,346	$	5,224,385
International sales		1,416,088		5,386,162
Total sales	$	3,431,434	$	10,610,547

Total sales for the three and nine months ended September 30, 2022 were $5,435,654 and $15,119,216, respectively.

(4) Segment Reporting

ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments.

The following table presents summary information by segment for the three months ended September 30, 2022:

	AmpliTech Inc.			Spectrum		Corporate			Total
Revenue	$	2,004,220		$	3,431,434		-		$	5,435,654
Cost of Goods Sold		962,687			1,812,052		-			2,774,739
Net Income (Loss)		(229,462	)		999,505		(193,127	)		576,916
Total Assets		18,670,329			16,789,819		2,047,114			37,507,262
Depreciation and Amortization		81,661			31,519		-			113,180
Interest Expense, net		5,173			-		4,145			9,318

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

The following table presents summary information by segment for the nine months ended September 30, 2022:

	AmpliTech Inc.			Spectrum		Corporate			Total
Revenue	$	4,508,669		$	10,610,547		-		$	15,119,216
Cost of Goods Sold		2,447,042			5,649,942		-			8,096,984
Net Income (Loss)		(1,724,208	)		2,811,217		(876,008	)		211,001
Total Assets		18,670,329			16,789,819		2,047,114			37,507,262
Depreciation and Amortization		198,901			94,559		-			293,460
Interest Expense, net		12,077			-		12,239			24,316

(5) Acquisition of Spectrum Semiconductors Materials

On December 15, 2021, AmpliTech Group Inc. acquired Spectrum Semiconductor Materials (SSM), an “S” Corporation located in Silicon Valley (San Jose, CA). Spectrum Semiconductor Materials (“SSM”) is a global authorized distributor of integrated circuit (“IC”) packaging and lids for semiconductor device assembly, prototyping, testing, and production requirements.

The purchase is expected to deliver significant strategic and top and bottom-line benefits while also building on AmpliTech’s technical and management expertise and distribution reach.

The purchase included all accounts receivables, accounts payable, inventory, orders, customers, property and equipment and intellectual property. The aggregate purchase price for the acquisition was $10,123,276 subject to certain working capital and other adjustments of which $665,200 was paid by the issuance of 188,442 unregistered shares of AmpliTech common stock at the closing of the Acquisition.

Simultaneously with the execution of the Purchase Agreement, $1,500,000 was deposited into escrow, comprising of a $750,000, “Purchase Price Adjustment Escrow Fund” and a $750,000, “Indemnification Escrow Fund. The Purchase Price Adjustment Escrow Fund will be available for the payment of any working capital adjustment owed by Seller to Buyer or Buyer to Seller pursuant to and in accordance with the Purchase Agreement.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

The Indemnification Escrow Fund will be available to satisfy any losses incurred or sustained by or imposed upon the Indemnified Parties pursuant to and in accordance with the Purchase Agreement. The escrow release date is March 31, 2023.

Within sixty (60) days after the Closing Date, AmpliTech prepared and delivered to Seller a statement setting forth its calculation of Closing Working Capital of the Business, according to the terms of the Purchase Agreement. The “Working Capital Adjustment” shall be an amount equal to the Closing Working Capital minus $3,296,427. If the Working Capital Adjustment is a positive number, Buyer shall pay to Seller an amount equal to the Working Capital Adjustment. If the Working Capital Adjustment is a negative number, Seller shall pay to Buyer an amount equal to the Working Capital Adjustment.

The Working Capital Adjustment was determined to be $708,076 owed to Seller.

Within forty (40) days after December 31, 2022, AmpliTech will prepare and deliver to Seller a statement setting forth its calculation of Two Years Net Revenues of the business, or the “Revenue Statement”. The Revenues Adjustment shall be an amount equal to 25% of two years net revenues minus $20,000,000. If the Revenues Adjustment is a positive number, Buyer shall pay to Seller an amount equal to the Revenues Adjustment. If the Revenues Adjustment is a negative number, Seller shall pay to Buyer and amount equal to the Revenues Adjustment. The fair value of the revenue adjustment was determined to be $1,365,038 owed to Seller and recorded as a contingent liability as of December 31, 2021.

The Purchase Agreement contains representations, warranties, and covenants believed to be customary for a transaction of this nature, including covenants as to indemnification for breaches of certain representations, warranties and covenants, subject to certain exclusions and caps. Further, the completion of the Acquisition is subject to release of all liens and to the satisfaction of closing conditions, including the continued employment of certain Company employees.

The fair value of the purchase consideration issued to Spectrum Semiconductor Materials was allocated to the net tangible assets acquired. The Company accounted for the Acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $4,098,516. The excess of the aggregate fair value of the net tangible assets has been allocated to net intangible assets of $7,389,794.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

The following table summarizes the allocation of the purchase price of the acquisition:

Purchase consideration at fair value:
Cash	$	8,000,000
Common stock		665,200
Net working capital adjustment		708,076
Indemnification escrow amount		750,000
Fair value of revenue earnout		1,365,038
Total purchase price	$	11,488,314

Allocation of purchase price:
Working Capital	$	3,730,133
Property and Equipment		99,188
Goodwill		4,696,883
Tradename		514,284
Customer relationships		2,178,631
Right of Use operating lease asset		858,508
Right of Use operating lease liability		(619,271	)
Other asset		29,958
Net assets acquired	$	11,488,314

The following table summarizes the Company’s consolidated results of operations, as well as unaudited proforma consolidated results of operations as though the acquisition had occurred on January 1, 2021:

		For the nine months ended
	September 30, 2021
		As Reported			Pro Forma

Net sales		$	2,553,982		$	12,605,950
Net income(loss) attributable to common shareholders			(1,945,471	)		694,107
Earnings per common share, basic and diluted:
Basic		$	(0.25	)	$	0.08
Diluted		$	(0.25	)	$	0.08

The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the Acquisition been completed as of January 1, 2021 or to project potential operating results as of any future date or for any future periods.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

(6) Marketable Securities

The following table is a summary of marketable securities at September 30, 2022:

	Adjusted Cost		Unrealized Gains		Unrealized Loss	Fair Value
Level 1 (1)
Money Market Fund	$	1,507,839				$	1,507,839
US Treasury Bills		493,110		213			493,323
Total	$	2,000,949		213		$	2,001,162

Cash and cash equivalents in our marketable securities account at September 30, 2022 was $1,507,839.

(1)	Level 1 fair value estimates are based on quoted prices in active markets for identical assets or liabilities.

When evaluating an investment for impairment, the Company reviews factors including the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, changes in market interest rates and whether it is more likely than not the Company will be required to sell the investment before recovery of the investment’s cost basis. As of September 30, 2022, the Company does not consider any of its investments to be impaired.

(7) Inventories

The inventory consists of the following at September 30, 2022 and December 31, 2021:

	September 30, 2022			December 31, 2021
Raw Materials	$	842,539		$	609,841
Work-in Progress		355,281			162,072
Finished Goods		6,170,131			4,452,885
Subtotal	$	7,367,951		$	5,224,798
Less: Reserve for Obsolescence		(1,114,000	)		(1,031,986	)
Total	$	6,253,951		$	4,192,812

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

(8) Property and Equipment

Property and Equipment consisted of the following at September 30, 2022 and December 31, 2021:

	September 30, 2022			December 31,2021
Lab Equipment	$	2,441,295		$	1,893,564
Manufacturing Equipment		129,745			25,000
Automobiles		7,335			7,335
Computer Equipment and Software		203,410			159,315
Leasehold Improvements		78,042			-
Furniture and Fixtures		143,894			27,504
Subtotal		3,003,721			2,112,718
Less: Accumulated Depreciation		(924,738	)		(757,430	)
Total	$	2,078,983		$	1,355,288

Depreciation expense for the three months ended September 30, 2022 and 2021 was $75,602 and $33,836, respectively.

Depreciation expense for the nine months ended September 30, 2022 and 2021 was $181,063 and $63,597, respectively.

(9) Intangible Assets

Goodwill

Goodwill is related to the acquisition of Specialty on September 12, 2019 and the acquisition of Spectrum Semiconductor Materials Inc. on December 15, 2021. Goodwill is primarily related to expected improvements and technology performance and functionality, as well sales growth from future product and service offerings and new customers, together with certain intangible assets that do not qualify for separate recognition. Goodwill is generally not amortizable for tax purposes and is not amortizable for financial statement purposes. As of September 30, 2022 and December 31, 2021, goodwill was valued at $4,817,019 respectively.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

Other Intangible Assets

Intangible assets with an estimated useful life of fifteen and twenty years consisted of the following at September 30, 2022:

	Gross Carrying Amount		Accumulated Amortization		Net		Weighted Average Life
Trade name	$	584,517	$	-	$	584,517	Indefinite
Customer relationships		2,591,491		165,704		2,425,787		18.24
Intellectual Property		202,771		41,390		161,381		11.96
Total	$	3,378,779	$	207,094	$	3,171,685

Amortization expense for the three months ended September 30, 2022 and 2021 was $37,578 and $10,345 respectively.

Amortization expense for the nine months ended September 30, 2022 and 2021 was $112,397 and $30,698, respectively.

Annual amortization of intangible assets are as follows:

2022		37,579
2023		149,976
2024		149,976
2025		149,976
2026		149,976
Thereafter		1,949,685
	$	2,587,168

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

(10) Cost Method Investment

On June 10, 2021, the Company entered into a membership interest purchase agreement with SN2N, LLC for an aggregate purchase price of $350,000, to be paid in four tranches. Each tranche represents a 5% membership interest, and in aggregate a 20% membership interest. SN2N plans to design and manufacture an un-hackable communications channel that creates a new security paradigm; a state-of-the art signal amplification secured by intelligence-community-caliber hardware encryption. AmpliTech would serve as exclusive manufacturer for the low noise amplifier product line used with this encryption technology. On June 15, 2022, an amendment to the membership interest purchase agreement was made to reflect a 19.9% membership interest. In light of this amendment, the Company overpaid by $1,750 for the membership interest and was subsequently reimbursed. As of September 30, 2022, the Company has made an investment of $348,250 for a 19.9% membership interest.

(11) Line of Credit

On November 20, 2021, AmpliTech renewed its business line of credit for $750,000 maturing on November 1, 2022. The line is evaluated monthly on a borrowing base formula advancing 75% of accounts receivables aged less than 90 days and 50% of inventory raw materials costs. The interest rate shall be based upon the Wall Street Journal Prime Rate, plus 1%. The Company has the option to prepay all or any portion of the amount owed prior to its due date without penalty.

In connection with the loan, the Company granted the lender a security interest in all its respective assets. In addition, the President and CEO, has agreed to guarantee the loan.

As of September 30, 2022 and 2021, the outstanding balance on the line of credit was $0.

The maturity date of the revolving line of credit, which was set to mature in November 2022, has been extended to January 30, 2023. There were no other modifications to the terms of this agreement.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

(12) Leases

The following was included in our balance sheet as of September 30, 2022:

Operating leases	September 30, 2022

Assets
ROU operating lease assets	$	4,346,815

Liabilities
Current portion of operating lease	$	575,816
Operating lease, net of current portion		3,918,623
Total operating lease liabilities	$	4,494,439

Financing leases
Assets
Property and equipment, gross	$	234,036
Accumulated depreciation		(104,045	)
Property and equipment, net	$	129,991

Liabilities
Current portion of financing lease	$	41,865
Financing lease, net of current portion		53,512
Total financing lease liabilities	$	95,377

The weighted average remaining lease term and weighted average discount rate at September 30, 2022 were as follows:

Weighted average remaining lease term (years)	September 30, 2022
Operating leases		9.7
Financing leases		3.22
Weighted average discount rate
Operating leases		4.48	%
Financing leases		4.70	%

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

Financing Lease

The Company entered into several 60-month lease agreements to finance certain laboratory and office equipment. As such, the Company has accounted for these transactions as a financing lease.

The following table reconciles future minimum financing lease payments to the discounted lease liability as of September 30, 2022:

2022		13,549
2023		36,476
2024		18,755
2025		18,190
2026		11,976
Thereafter		3,992
Total lease payments		102,938
Less imputed interest		(7,661	)
Total lease obligations		95,277
Less current obligations		(41,865	)
Long-term lease obligations	$	53,412

Operating Leases

On December 4, 2015, the Company entered into a new operating lease agreement to rent office space in Bohemia, NY. This five-year agreement commenced February 1, 2016 with an annual rent of $50,000 and 3.75% increases in each successive lease year. On January 13, 2021, a lease rider was annexed to the original lease whereby the lease term will be extended on a month-by-month basis, commencing on February 1, 2021. The lease was terminated in April 2022.

On September 12, 2019, the Company entered into a new operating lease agreement to rent office space in Ronkonkoma, NY. This five- year agreement commenced on September 12, 2019 with an annual rent of $90,000 and 3% increase in each successive lease year beginning in 2021. The Company has an option to buy the property during the first two years of the lease for $1,200,000 and then at fair market value for the remainder of the lease term. This option has expired and was not exercised as of September 30, 2022.

On November 27, 2019, the Company entered a 39-month agreement to lease an automobile with a monthly payment of $420.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

On December 15, 2021, the Company assumed the SSM lease agreement for office and warehouse space in San Jose, CA, with the same terms and conditions. Effective February 1, 2020, the lease term will expire on January 31, 2025 with a base rent of $24,234 for the first 12 months and increase by approximately 3% every year.

On October 15, 2021, the Company entered into a new lease for a 20,000 square foot facility at 155 Plant Avenue, Hauppauge, New York, for a term of seven years and two months. The yearly base rent of $346,242 shall increase at a rate of 2.75% per year to begin on the first anniversary lease commencement date and each year thereafter. The first two months of basic rent shall be abated following the commencement lease date. In the event the landlord decides to sell the property, the Company shall have the right of first offer to purchase subject property. Upon lease execution, the Company paid two months of base rent as a security deposit and one month’s rent totaling $86,560. The Company moved into the new manufacturing and headquarters facility April 1, 2022.

The following table reconciles future minimum operating lease payments to the discounted lease liability as of September 30, 2022:

2022		188,550
2023		768,465
2024		765,075
2025		400,321
2026		383,347
Thereafter		3,112,040
Total lease payments		5,617,798
Less imputed interest		(1,123,359	)
Total lease obligations		4,494,439
Less current obligations		(575,816	)
Long-term lease obligations	$	3,918,623

(13) Notes Payable

Promissory Note:

On September 12, 2019, AmpliTech Group, Inc. acquired Specialty, a privately held company based in Ronkonkoma, NY. The purchase included all inventory, orders, customers, property and equipment, and all intellectual property. The assets also included all eight team members of Specialty. The total consideration paid was $1,143,633, consisting of $668,633 in cash and a $475,000 promissory note with an interest rate of 6%. Beginning November 1, 2019, payment of principal and interest shall be due payable in fifty-nine (59) monthly payments of $9,213 with a final payment due October 1, 2024 of $9,203. As of September 30, 2022, the balance of this promissory note was $207,595. Principal payments of $71,524 along with interest expense of $11,399 was paid during the nine months ended September 30, 2022. The promissory note is secured by certain assets of the Company.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

Loan Payable:

On September 12, 2019, the Company was approved for a $250,000 equipment leasing facility which was subsequently increased to $500,000. The Company has borrowed against the leasing facility as follows:

	·	On December 20, 2019, the Company borrowed $58,192 to be paid over a three-year term with monthly payments of $1,736 at an interest rate of 5.26%. The balance as of September 30, 2022 was $3,451. Principal payments of $15,180 and interest expense of $444 was paid for the nine months ended September 30, 2022.

	·	On May 14, 2020, the Company borrowed $27,494 to be paid over a three-year term with monthly payments of $815 at an interest rate of 4.268%. The balance as of September 30, 2022 was $5,620. Principal payments of $7,012 and interest expense of $323 was paid for the nine months ended September 30, 2022.

	·	On June 10, 2020, the Company borrowed $41,015 to be paid over a three-year term with monthly payments of $1,216 at an interest rate of 4.278%. The balance as of September 30, 2022 was $9,565. Principal payments of $10,421 and interest expense of $523 was paid for the nine months ended September 30, 2022.

	·	On May 6, 2022, the Company borrowed $441,139 to be paid over a three-year term with monthly payments of $13,341 at an interest rate of 5.6%. On June 15, 2022, this equipment order was cancelled resulting in a full refund of $441,139 less interest paid of $6,317. The loan was repaid in August 2022.

In January 2022, the Company purchased machinery for $91,795, applying a deposit of $9,180 and financing the balance of $82,616 over 24 payments at an interest rate of 1.90%. The balance as of September 30, 2022 was $52,002. Principal payments of $30,614 and interest expense of $984 was paid for the nine months ended September 30, 2022.

Future principal payments over the term of the loans as of September 30, 2022 are as follows:

	Payments
2022	$	36,040
2023		152,592
2024		89,599
Total remaining payments	$	278,231

(14) Stockholders’ Equity

The total number of shares of stock this Corporation is authorized to issue shall be five hundred one million (501,000,000) shares, par value $0.001 per share. Our authorized capital stock consists of 500,000,000 shares of common stock and 1,000,000 shares of blank check preferred stock.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

Preferred Stock

On July 10, 2013, the Board of Directors of the Company approved a certificate of amendment to the articles of incorporation and changed the authorized capital stock of the Company to include and authorize 500,000 shares of Preferred Stock, par value $0.001 per share. On October 7, 2020, the Board of Directors of the Company approved a certificate of amendment to the articles of incorporation and changed the total number of authorized shares of Preferred Stock to be 1,000,000 shares, $0.001 per share.

On October 7, 2020, our Board of Directors and our stockholders approved a resolution to amend and restate the certificate of designation of preferences, rights and limitations of Series A Convertible Preferred Stock to restate that there are 401,000 shares of the Company’s blank check Preferred Stock designated as Series A Convertible Preferred Stock. The amended and restated certificate clarifies that the Series A Convertible Preferred Stock convert at a rate of five shares of the Company’s common stock for every share of Series A Convertible Preferred Stock, and also restates that the Series A Convertible Preferred Stock shall be entitled to vote on all matters submitted to shareholders of the Company for each share of Series A Convertible Preferred Stock owned on the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, on the date such vote is taken or any written consent of shareholders is solicited. The number of votes entitled to be cast by the holders of the Series A Convertible Preferred Stock equals that number of votes that, together with votes otherwise entitled to be cast by the holders of the Series A Convertible Preferred Stock at a meeting, whether by virtue of stock ownership, proxies, voting trust agreements or otherwise, entitle the holders to exercise 51% of all votes entitled to be cast to approve any action which Nevada law provides may or must be approved by vote or consent of the holders of common stock entitled to vote.

Common Stock:

The Company originally authorized 50,000,000 shares of common stock with a par value of $0.001. Effective May 20, 2014, the Company increased its authorized shares of common stock from 50,000,000 to 500,000,000.

On February 17, 2021, AmpliTech Group Inc., common stock and warrants under the symbols “AMPG” and “AMPGW”, respectively, commenced trading on NASDAQ. In connection with the public offering, 1,371,428 units at an offering price of $7.00 per unit were sold. Each unit issued in the offering consisted of one share of common stock and one warrant. Maxim Group LLC acted as sole book-running manager for the offering. Net proceeds received was $8,119,502.

On February 24, 2021, Maxim Group LLC exercised its overallotment option to purchase an additional 205,714 shares of common stock. Net proceeds received was $1,330,095.

As of December 31, 2021, 210,700 warrants were exercised at an exercise price of $7.00 and 210,700 shares of common stock were issued. Gross proceeds received were $1,474,900.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

On April 15, 2021, the Company entered into definitive agreements with certain institutional investors for the sale of 2,715,000 shares of common stock in a registered direct offering priced at-the-market under NASDAQ rules. Concurrently, the Company agreed to issue to the investors, in a private placement, warrants to purchase an aggregate of 1,900,500 shares of common stock at an exercise price of $8.48 per share with a five-year term. Maxim Group LLC acted as the exclusive placement agent for this offering. The shares of common stock as described were offered pursuant to a “shelf” registration statement filed with the SEC on April 1, 2021 and declared effective on April 14, 2021. The aggregate gross proceeds to the Company were approximately $23 million dollars before deducting placement agent’s fees and expenses. The offering closed on April 16, 2021. On April 30, 2021, the Company filed a registration statement providing for the resale of the shares of common stock issuable upon the exercise of the warrants issued in the private placement. The registration statement became effective on May 11, 2021.

On December 15, 2021, 188,442 unregistered shares of AmpliTech’s common stock were issued as part of the Spectrum Semiconductor Materials acquisition for $665,200.

On May 20, 2022, 30,000 restricted stock units at an exercise price of $1.96 were issued to a board advisor. Vesting will occur in equal quarterly installments of 2,500 shares beginning on May 20, 2022. On May 20, 2022 and August 20, 2022, 2,500 shares of common stock were issued, respectively.

On June 17, 2022, 15,000 restricted stock units at an exercise price of $1.97 were issued to three board members. Vesting occurred immediately and 45,000 shares of common stock were issued.

2020 Equity Incentive Plan:

In October 2020, the Board of Directors and shareholders adopted the Company’s 2020 Equity Incentive Plan (the “2020 Plan”), effective as of December 14, 2020. Under the 2020 Plan, the Company reserved 1,250,000 shares of common stock to grant shares of the Company’s common stock to employees and individuals who perform services for the Company. The purpose of the 2020 Plan is to attract and retain the best available personnel for positions of substantial responsibility, to provide incentives to individuals who perform services for the Company, and to promote the success of the Company’s business. The 2020 Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares, and other stock or cash awards as the Board of Directors may determine.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

Stock Options:

Below is a table summarizing the changes in stock options outstanding for the nine months ended September 30, 2022:

	Number of		Weighted Average
	Options		Exercise Price ($)
Outstanding at December 31, 2021		305,500	$	3.74
Granted		307,000		1.83
Exercised		-		-
Expired		-		-
Outstanding at September 30, 2022		612,500	$	2.77
Exercisable at September 30, 2022		612,500	$	3.35

As of September 30, 2022, all outstanding stock options were issued according to the Company’s 2020 Plan, and there remains 565,000 shares of common stock available for future issuance under the 2020 Plan.

Stock-based compensation expense related to stock options of $54,630 and $197,121 was recorded for the three and nine months ended September 30, 2022. As of September 30, 2022, the remaining unrecognized compensation cost related to non-vested stock options is $486,225 and is expected to be recognized over 4.45 years. The outstanding stock options have a weighted average remaining contractual life of 4.79 years and a total intrinsic value of $24,000.

Warrants:

Below is a table summarizing the changes in warrants outstanding for the nine months ended September 30, 2022:

	Number of		Weighted Average
	Warrants		Exercise Price ($)
Outstanding at December 31, 2021		3,296,942	$	7.86
Granted		-		-
Exercised		-		-
Expired		-		-
Outstanding at September 30, 2022		3,296,942	$	7.83
Exercisable at September 30, 2022		3,296,942	$	7.83

Stock-based compensation expense related to warrants of $4,865 and $48,902 was recorded for the three and nine months ended September 30, 2022. As of September 30, 2022, the remaining unrecognized compensation cost related to non-vested warrants is $0. The outstanding warrants have a weighted average remaining contractual life of 3.48 years and a total intrinsic value of $0.

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AmpliTech Group, Inc.

Notes To Condensed Consolidated Financial Statements

For The Nine Months Ended September 30, 2022 and 2021

Restricted Stock Units:

Below is a table summarizing the changes in restricted stock units outstanding for the nine months ended September 30, 2022:

	Number of		Weighted Average
	RSU’s		Exercise Price ($)
Outstanding at December 31, 2021		-		-
Granted		75,000	$	1.97
Exercised		50,000	$	1.97
Expired		-		-
Outstanding at September 30, 2022		25,000	$	1.96
Exercisable at September 30, 2022		25,000	$	1.96

Stock-based compensation expense related to restricted stock units of $4,924 and $100,669 was recorded for the three and nine months ended September 30, 2022. As of September 30, 2022, the remaining unrecognized compensation cost related to non-vested restricted stock units is $46,781. The outstanding restricted stock units have a weighted average remaining contractual life of 2.39 years and a total intrinsic value of $0.

(15) Commitments and Contingencies

On November 19, 2021, AmpliTech Group, Inc. entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Spectrum Semiconductor Materials Inc. (the “Seller” or “SSM”), pursuant to which AmpliTech would acquire substantially all of the assets of the Company (the “Acquisition”). The Acquisition was completed on December 15, 2021.

Within forty (40) days after December 31, 2022, AmpliTech, as stipulated in the Purchase Agreement, will prepare and deliver to Seller a statement setting forth its calculation of Two Years Net Revenues of the business, or the “Revenue Statement”. The Revenues Adjustment shall be an amount equal to 25% of two years net revenues minus $20,000,000. If the Revenues Adjustment is a positive number, Buyer shall pay to Seller an amount equal to the Revenues Adjustment. If the Revenues Adjustment is a negative number, Seller shall pay to Buyer and amount equal to the Revenues Adjustment. The fair value of the revenue adjustment was determined to be $1,365,038 owed to Seller and recorded as a contingent liability as of September 30, 2022 and December 31, 2021.

(16) Subsequent events

The maturity date of the revolving line of credit, which was set to mature in November 2022, has been extended to January 30, 2023. There were no other modifications to the terms of this agreement.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis contain forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.

Business Overview

AmpliTech Group Inc. (“AMPG,” “AmpliTech” or the “Company”), incorporated in 2010 in the state of Nevada, is the parent company of its subsidiary AmpliTech, Inc., and AMPG’s divisions Specialty Microwave, Spectrum Semiconductor Materials, and AmpliTech Group MMIC Design Center (“AGMDC”).

AmpliTech designs, engineers and assembles micro-wave component-based amplifiers that meet individual customer specifications. Our products consist of radio frequency (“RF”) amplifiers and related subsystems, operating at multiple frequencies from 50kHz to 44GHz, including low noise amplifiers (“LNA”), medium power amplifiers, cryogenic amplifiers, and custom assembly designs for the global satellite communications, telecom (5G & IoT), space, defense, and quantum computing markets. We also offer non-recurring engineering services on a project-by-project basis, for a predetermined fixed contractual amount, or on a time plus material basis. We have both domestic and international customers in such industries as aerospace, governmental, defense and commercial satellite.

Specialty Microwave designs and manufactures state-of- the-art precision SATCOM microwave components, RF subsystems and specialized electronic assemblies for the military and commercial markets, flexible and rugged waveguides, wave guide adapters and more.

AGMDC designs, develops and manufactures state-of-the-art signal processing components for satellite and 5G communications networks, defense, space and other commercial applications, allowing the Company to market its products to wider base of customers requiring high technology in smaller packages.

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On November 19, 2021, AMPG entered into an Asset Purchase Agreement with Spectrum Semiconductor Materials Inc. (“SSM”), a globally authorized distributor of integrated circuit (IC) packaging and lids for semiconductor device assembly, prototyping, testing, and production requirements founded in 1990 and headquartered in San Jose, CA, pursuant to which AMPG acquired substantially all of the assets of the Company (the Acquisition). The Acquisition was completed on December 15, 2021.

In 2021, the Company opened a monolithic microwave integrated circuits (“MMIC”) chip design center in Texas and has started to implement several of its proprietary amplifier designs into MMIC components. MMICs are semiconductor chips used in high-frequency communications applications. MMICs are widely desired for power amplification solutions to service emerging technologies, such as phased array antennas and quantum computing. MMICs carry a smaller footprint enabling them to be incorporated into a broader array of systems while reducing costs.

In August 2022, AmpliTech Group True G Speed Services (“TGSS”) division was formed to enable “true G speeds” to the industry. TGSS’ main function will be to plan and configure 5G radio systems and make them Open Radio Access Network compliant. TGSS will implement AmpliTech’s low noise amplifier devices in these systems to promote greater coverage, longer range and faster speeds.

Our mission is to patent our proprietary IP and trade secrets that were used in small volume niche markets and expand our capabilities through strategic partnerships, joint ventures, mergers/acquisitions with key industry leaders in the 5G/6G, quantum computing, and cybersecurity markets. We believe this will enable us to scale up our products and revenue by developing full systems and subsystems with our unique technology as a core component, which we expect will position us as a global leader in these rapidly emerging technology sectors and addresses large volume markets as well, such as cellphone handsets, laptops, server networks, and many other applications that improve everyday quality of life.

The Company’s research and development initiative to expand its product line of low noise amplifiers to include its new 5G and wireless infrastructure products and MMIC designs is progressing significantly. Our combined engineering and manufacturing resources are expected to complement the development of new subsystems for satellite, wireless, and 5G infrastructures, as well as advanced military and commercial markets.

Corporate Information

Our principal executive offices are located at 155 Plant Avenue, Hauppauge, NY 11788. Our telephone number is (631) 521-7831. Our corporate website is www.amplitechinc.com. The information on our website is not a part of, or incorporated in, this prospectus.

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Results of Operations

For the Three Months Ended September 30, 2022 and September 30, 2021

Revenues

Sales increased from $1,056,596 for the three months ended September 30, 2021 to $5,435,654 for the three months ended September 30, 2022, an increase of $4,379,058 or approximately 414.45%. Sales increased primarily due to the acquisition of Spectrum Microwave, whose sales for the quarter totaled $3,431,434. Sales in the amplifier and related passive microwave components and subsystems division increased by $947,624 or 89.69%, resulting primarily from an increase in military and telecommunication applications.

Cost of Goods Sold and Gross Profit

Cost of Goods Sold increased from $742,983 for the three months ended September 30, 2021 to $2,774,739 for the three months ended September 30, 2022, an increase of $2,031,756 or 273.46%. This increase is directly related to approximately $1,812,052 of additional expense included in cost of goods sold as part of the SSM acquisition, additional hiring of direct labor and an increase in outsourcing because of the increase in sales. As a result, the gross profit was $2,660,915 for the three months ended September 30, 2022 compared to $313,613 for the three months ended September 30, 2021, an increase of $2,347,302 or 748.47%. Overall, gross profit as a percentage of sales increased to 48.95% from 29.68% as a result of the acquisition and the increase in LNA and RF subsystem sales. AmpliTech reported gross profit margin of 51.97% while Spectrum’s gross profit margin was 47.19%.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $1,852,345 for the three months ended September 30, 2022 from $833,574 for the first three months ended September 30, 2021, an increase of $1,018,771 or approximately 122.22%. With the acquisition of Spectrum, selling, general and administrative expenses increased by $619,877. Other expenses such as salaries, employee benefits, accounting fees, D&O insurance, stock compensation, trade show expenses and business development expenses have increased as well. Additionally, with the relocation to the new facility, rent and utilities have increased.

Research and Development Expenses

Research and development expenditures are charged to operations as incurred. The major components of research and development costs include consultants, outside service, and supplies.

Research and development costs for the three months ended September 30, 2022 and 2021 were $222,549 and $16,755, respectively.

The increase in research and development of $205,794 or 1228.25% is primarily due to the Company implementing its research and development into the next generation of 5G/6G subsystems for cellular and satellite communications. The Company is in the process of designing and developing antennas and subsystems that will be an integral part of the GPS and 5G infrastructure. These subsystems will enable high-speed, high capacity 5G/6G networks that will be installed into infrastructure for retrofitting and improving connectivity for cellphones, satellites and many other everyday applications.

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In addition, AGMDC, the MMIC chip design center in Texas has started to implement several of its proprietary amplifier designs into MMIC components. MMICs are semiconductor chips used in high-frequency communications applications and are widely desired for power amplification solutions to service emerging technologies such as phased array antennas and quantum computing.

Income (Loss) From Operations

As a result of the above, the Company reported income from operations of $586,021 and a loss of $536,716 for the three months ended September 30, 2022 and 2021, respectively.

Other Income (Expenses)

Interest expense increased by $5,476 or 142.53%, when comparing the three months ended September 30, 2022 to the three months ended September 30, 2021.

Due to market fluctuations, the Company recorded an unrealized gain on investments of $213 for the three months ended September 30, 2022 and an unrealized loss of $63,807 for the three months ended September 30, 2021.

Net Income (Loss)

The Company reported net income of $576,916 and a net loss of $592,845 for the three months ended September 30, 2022, and 2021, respectively.

For the Nine Months Ended September 30, 2022 and September 30, 2021

Revenues

Sales increased by $12,565,234 or approximately 491.99%, when comparing sales for the nine months ended September 30, 2021 of $2,553,982 to sales for the nine months ended September 30, 2022 of $15,119,216. Sales increased primarily due to the acquisition of Spectrum Microwave, whose sales for the nine months ended September 30, 2022 was $10,610,547.Amplifier and RF subsystems sales increased by $1,954,687 or 76.53%, because of the demand for RF amplifiers in both the telecommunication and military markets.

Cost of Goods Sold and Gross Profit

Cost of goods sold increased by $6,256,220 or 339.87% for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. An increase of $5,649,942 is directly related to the acquisition of Spectrum Microwave, with the balance attributable to the increase in direct labor and outsourcing.

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Gross profit increased by $6,309,014 or 884.58%, when comparing the first nine months of 2021 to the first nine months of 2022. Overall, gross profit percentage increased from 27.93% to 46.45%, with AmpliTech reporting a gross profit of 45.73% and Spectrum reporting a gross profit of 46.75%.

Selling, General and Administrative Expenses

General and administrative expenses increased from $2,763,292 for the first nine months of 2021 compared to $5,975,440 for the first nine months of 2022, an increase of $3,212,148 or approximately 116.24%. With the acquisition of Spectrum, selling, general and administrative expenses increased by $2,149,388. The Company experienced an increase in parent company expenses, such as stock compensation, accounting fees and DO insurance. Additional increases include salaries and employee benefits. Approximately $154,000 of expense was related to the trade shows that the Company attended in Denver, Washington DC, and Italy.

With the relocation to the new facility, we incurred moving expenses of $43,040, along with the increase in rent expense, utilities, and office expense.

Research and Development Expenses

Research and development expenditures are charged to operations as incurred. The major components of research and development costs include consultants, outside service, and supplies.

Research and development costs for the nine months ended September 30, 2022 and 2021 were $811,688 and $39,142, respectively.

The increase in research and development of $772,546 is a result of the Company implementing its research and development into the next generation of 5G/6G subsystems for cellular and satellite communications. The Company is in the process of designing and developing antennas and subsystems that will be an integral part of the GPS and 5G infrastructure. These subsystems will enable high-speed, high capacity 5G/6G networks that will be installed into infrastructure for retrofitting and improving connectivity for cellphones, satellites and many other everyday applications.

Income (Loss) From Operations

As a result of the above, the Company reported income from operations of $235,104 for the nine months ended September 30, 2022, compared to the loss from operations of $2,089,216 for the nine months ended September 30, 2021, an overall increase of $2,324,320.

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Other Income (Expenses)

Interest expense decreased from $36,840 for the first nine months of 2021 compared to $24,316 for the first nine months of 2022, a decrease of $12,524 or 34.0%. The decrease was primarily due to the repayment of debt.

The Company recorded an unrealized gain on investments of $213 for the nine months ended September 30, 2022 and an unrealized loss on investments of $63,135 for the nine months ended September 30, 2021.

On April 20,2021, the SBA approved the PPP loan forgiveness of $232,200.

The Company also recorded other income of $11,520 for the nine months ended September 30, 2021.

Net Income (Loss)

The Company reported net income of $211,001 for the nine months ended September 30, 2022, compared to a net loss of $1,945,471 for the nine months ended September 30, 2021.

Liquidity and Capital Resources

Operating Activities

The net cash used in operating activities for the nine months ended September 30, 2022 was $3,508,820 resulting primarily from net income and operating changes in accounts receivable, inventories, accounts payable and accrued expenses, operating lease liability and customer deposits.

The net cash used in operating activities for the nine months ended September 30, 2021 was $2,514,509 resulting primarily from the net loss and the operating changes in accounts receivable, inventories, prepaid expenses and the operating lease liability.

Investing Activities

The net cash used in investing activities for the nine months ended September 30, 2022 was $1,287,613, of which $696,253 related to the purchase of equipment, $493,110 for the purchase of marketable securities and $98,250 for our investment in SN2N.

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The net cash used in investing activities for the nine months ended September 30, 2021 was $5,413,847 resulting in the purchase of equipment, marketable securities and a 10% membership interest in SN2N.

Financing Activities

The net cash used in financing activities for the nine months ended September 30, 2022 was $167,485 resulting primarily from the repayments of notes payable and finance lease.

The net cash provided by financing activities for the nine months ended September 30, 2021 was $30,676,693 which includes $31,900,840 million from new issuances of common stock and warrants, netted against the repayment of the line of credit, notes payable and finance lease payments.

We have historically financed our operations by the issuance of debt from third party lenders, equity offerings, notes issued to various private individuals and personal funds advanced from time to time by the majority shareholder, who is also the President and Chief Executive Officer of the Company.

As of September 30, 2022, we had cash and cash equivalents of $13,054,956 a working capital of $20,170,386 and an accumulated deficit of $6,416,176.

As of December 31, 2021, we had cash and cash equivalents of $18,018,874, a working capital of $20,467,429 and an accumulated deficit of $6,627,177.

We intend to continue to finance our internal growth with cash on hand, cash provided from operations, borrowings, debt or equity offerings, or some combination thereof. We believe that our cash provided from operations and cash on hand will provide enough working capital to fund our operations for the next twelve months.

Critical Accounting Policies, Estimates and Assumptions

The SEC defines critical accounting policies as those that are, in management’s view, most important to the portrayal of our financial condition and results of operations and those that require significant judgments and estimates.

The discussion and analysis of our financial condition and results of operations is based upon our financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of inventory, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes there have been no significant changes during the nine month period ended September 30, 2022, to the items disclosed as critical accounting policies in management’s discussion and analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when we deem it necessary.

Off Balance Sheet Transactions

None.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Smaller reporting companies are not required to provide the information required by this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, including our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Our management does not expect that our disclosure controls and procedures will prevent all error and all fraud. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Based on that evaluation, as of September 30, 2022, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes that have affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the period covered by this report.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

To the best of our knowledge, there are no pending legal proceedings to which we are a party or of which any of our property is the subject.

Item 1A. Risk Factors.

Smaller reporting companies are not required to provide the information required by this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable

Item 5. Other Information.

None.

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Item 6. Exhibits.

(a) Exhibits

*Exhibit No.*		*Description*

31.1		Rule 13a-14(a)/ 15d-14(a) Certification of Principal Executive Officer
31.2		Rule 13a-14(a)/ 15d-14(a) Certification of Principal Financial Officer
32.1		Section 1350 Certification of Principal Executive Officer
32.2		Section 1350 Certification of Principal Financial Officer
101. INS		XBRL Instance Document
101. SCH		XBRL Taxonomy Extension Schema Document
101. CAL		XBRL Taxonomy Extension Calculation Link base Document
101. DEF		XBRL Taxonomy Extension Definition Link base Document
101. LAB		XBRL Taxonomy Extension Label Link base Document
101. PRE		XBRL Taxonomy Extension Presentation Link base Document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AmpliTech Group, Inc.

Date: November 14, 2022	By:	/s/ Fawad Maqbool
		Fawad Maqbool
		President and Chief Executive Officer (Principal Executive Officer)

Date: November 14, 2022

By:

/s/ Louisa Sanfratello

Louisa Sanfratello

Chief Financial Officer

(Principal Financial and Accounting Officer)

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AmpliTech (AMPG) 10-Q2022 Q3 Quarterly report

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