AmpliTech Group Inc

(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.

In 2021, the Company opened AGMDC, 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. 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 a wider base of customers requiring high technology in smaller packages.

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.

In August 2022, AmpliTech Group’s True G Speed Services (AGTGSS) division was founded to serve and provide complete system integration and ORAN compliant O-RU’s (Radio Units) for telcos, enabling the industry to access ‘True 5G Speeds’. AGTGSS provides Managed Services, Cyber Security, Cloud Services, Data Sciences and Telco Cloud Services. AGTGSS will also be providing full installation of Private 5G Networks (P5G) which includes the deployment of AmpliTech Group developed radio units. AGTGSS will implement AmpliTech’s low noise amplifier devices in these systems to promote greater coverage, longer range and faster speeds.

(2)Summary of Significant Accounting Policies

Basis of Accounting

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

Principles of Consolidation

The accompanying 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’s presentation. These reclassifications have 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 December 31, 2023, the Company’s cash and cash equivalents were deposited in five financial institutions.

The Company’s policy is to place its cash and cash equivalents with high-quality, major financial and investment institutions in order to limit the amount of credit exposure. Accounts at each financial institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. Additionally, cash and cash equivalents maintained with investment institutions are insured by the Securities Investor Protection Corporation (“SIPC”) up to $500,000, which includes a $250,000 limit for cash. In addition, the investment institution provides additional “excess of SIPC” coverage, which insures up to $600 million. The Company has not experienced any losses to date resulting from this policy. At December 31, 2023 and 2022, the Company had $3,170,500 and $12,040,022 in excess of FDIC, SIPC, and excess SIPC insured limits, respectively. The Company has not experienced any losses in such accounts.

Accounts Receivable

Accounts receivable consist of trade receivables arising from credit sales to customers in the normal course of business. These receivables are recorded at the time of sale, net of an allowance for current expected credit losses. In accordance with ASC Topic 326, “Financial Instruments – Credit Losses,” the Company estimates expected credit losses based on historical bad debt experience, the aging of accounts receivable, the current creditworthiness of our customers, prevailing economic conditions, and reasonable and supportable forward-looking information.

An allowance of $0 has been recorded at December 31, 2023 and 2022, respectively.

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 consists primarily of raw materials, work in progress and finished goods, are 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 December 31, 2023 and 2022, the reserve for inventory obsolescence was $1,146,000 and $1,128,000, respectively.

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:

Intangible Assets

Definite-lived intangible assets including customer relationships and intellectual property are subject to amortization. Intangible assets are amortized over their estimated useful life on a straight-line basis. Estimated useful lives are determined considering the period the assets are expected to contribute to future cash flows. Indefinite-lived intangible assets are not subject to amortization.

Intangible assets are amortized as follows:

Long-Lived Assets

The Company reviews the carrying value of long-lived assets such property and equipment, right-of-use (“ROU”) assets, and definite-lived intangible assets 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.

The 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. During the years ended December 31, 2023 and 2022, there were no impairments of long-lived assets.

Goodwill and Indefinite-Lived Intangible Assets

We follow the acquisition method of accounting to record the assets and liabilities of acquired businesses at their estimated fair value at the date of acquisition. We initially record goodwill for the amount the consideration transferred exceeds the acquisition-date fair value of net tangible and identifiable intangible assets acquired.

Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are tested for impairment annually on December 31, or more frequently when events or circumstances indicate an impairment may have occurred. When assessing the recoverability of goodwill and indefinite-lived intangible assets, the Company may first assess qualitative factors in determining whether it is more likely than not that the fair value of a reporting unit, including goodwill, or an indefinite-lived intangible asset is less than its carrying amount. The qualitative assessment is based on several factors, including the current operating environment, industry and market conditions, and overall financial performance. The Company may elect to bypass this qualitative assessment for some or all of its reporting units or other indefinite-lived intangible assets and perform a quantitative assessment, based on management's judgment.

If we quantitatively test goodwill and indefinite-lived intangible assets for possible impairment, we calculate the fair value for the reporting unit and indefinite-lived assets and compare the amount to their carrying amount. If the fair value of a reporting unit and indefinite-lived asset exceeds their carrying amount, the reporting unit and indefinite-lived assets are not considered impaired. If the carrying amount of the reporting unit and indefinite-lived assets exceeds their fair value, the reporting unit and indefinite-lived assets are considered to be impaired, and an impairment charge is recognized for the difference.

We estimate the fair value of our reporting units and indefinite-lived intangible assets based on the present value of estimated future cash flows. Considerable management judgment is necessary to evaluate the impact of operating and macroeconomic changes and to estimate the future cash flows used to measure fair value. Our estimates of future cash flows consider past performance, current and anticipated market conditions and internal projections and operating plans. Additional assumptions include forecasted growth rates, estimated discount rates, and estimated royalty rates for our indefinite-lived intangible assets.

During the years ended December 31, 2023 and 2022, we recorded goodwill impairments of $0 and $120,136, respectively. During the years ended December 31, 2023 and 2022, there were no impairments of indefinite-lived intangible assets.

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 December 31, 2023 and 2022, respectively. (see Note 9). These investments are included in other assets on the consolidated balance sheets. There were no indicators of impairment during the years ended December 31, 2023 and 2022.

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.

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 December 31, 2023 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. We 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.

Cost of Sales

We include product costs such material, direct labor, overhead costs, production-related depreciation expense, outside labor and production supplies in cost of sales.

Shipping and Handling

Shipping and handling charges are generally incurred at the customer’s expense. However, when billed to our customers, shipping and handling charges are included in net sales for the applicable period, and the corresponding shipping and handling expense is reported in cost of sales.

Research and Development

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

Research and development costs for the years ended December 31, 2023 and 2022 were $2,341,845 and $1,024,127, respectively.

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 allowancesare 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 December 31, 2023 and 2022, the Company had no material unrecognized tax benefits.

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 December 31, 2023 and 2022, there were 4,545,442 and 4,235,442, 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 years ended December 31, 2023 and 2022, are anti-dilutive.

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, inventories, 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 credit risk consist primarily of cash and cash equivalents, marketable securities and accounts receivable.

The Company places its cash and cash equivalents and marketable securities with high-quality, major financial and investment institutions in order to limit the amount of credit exposure. For accounts receivable, the Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses.

Sales to the Company’s largest customer represented approximately 8.45% of total sales for the year ended December 31, 2023. As of December 31, 2022, there were two customers that each accounted for 25.98% and 10.60% of total revenue.

As of December 31, 2023 and 2022, there were two vendors that accounted for 33.14% and 17.18% and 44.15% and 29.29%, respectively, of total component parts purchased.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this update, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. As a smaller reporting company, the guidance was effective for our fiscal years beginning after December 15, 2022. The adoption of this guidance did not have an impact on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures by requiring; (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. These amendments are to be applied prospectively, with retrospective application permitted. We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about reportable segment’s profit or loss and assets that are currently required annually. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. These amendments are to be applied retrospectively. We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.

In August 2023, the FASB issued ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, which requires a newly-formed joint venture to apply a new basis of accounting to its contributed net assets, resulting in the joint venture initially measuring its contributed net assets at fair value on the formation date. ASU 2023-05 is effective for all joint venture formations with a formation date on or after January 1, 2025, with early adoption permitted. These amendments are to be applied prospectively, with retrospective application permitted for joint ventures formed before the effective date. We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.

**(3)Revenues **

The following table presents sales disaggregated based on geographic regions and for the years ended:

Total sales for the year ended December 31, 2023 and 2022, were $15,584,577 and $19,394,492, 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 Company has two reportable segments, the manufacturing and engineering segment, which is operated by AmpliTech Inc. and Specialty Microwave: and the distribution segment, which is operated by Spectrum. The manufacturing and engineering segment assembles microwave components, and the distribution segment is a global distributor of integrated circuits packages and lids. The Company provides general corporate services to its segments; however, these services are not considered when making operating decisions and assessing segment performance. These services are reported under “Corporate” below and include costs associated with executive management, financing activities and public company compliance.

The following table presents summary information by segment for the year ended December 31, 2023:

The following table presents summary information by segment for the year December 31, 2022:

(5)Marketable Securities

The following table is a summary of marketable securities at December 31, 2023:

The following table is a summary of marketable securities at December 31, 2022:

Cash and cash equivalents at December 31, 2023 and 2022 was $2,639,036 and $1,759,299, respectively.

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 December 31, 2023 and 2022, the Company does not consider any of its investments to be impaired.

(6)Inventories

The inventory consists of the following at December 31, 2023 and 2022:

(7)Property and Equipment

Property and Equipment consisted of the following at December 31, 2023 and 2022:

Depreciation expense for the years ended December 31, 2023 and 2022 was $381,185 and $262,032 respectively, of which $256,248 and $194,456, respectively were included in cost of goods sold.

Property and equipment purchased in the amount of $234,036 under financing leases is included in the totals above. As of December 31, 2023 and 2022, the outstanding balance of the financing leases were $49,336 and $82,816, respectively.

(8)Goodwill and Intangible Assets

Goodwill

Goodwill is related to the acquisition of Specialty Microwave Corporation 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 as 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 and financial statement purposes. As of December 31, 2022, goodwill related to the acquisition of Specialty was deemed impaired in the amount of $120,136. As of December 31, 2023 and 2022, goodwill was $4,696,883, respectively.

Other Intangible Assets

Intangible assets with an estimated useful life of fifteen and twenty years consisted of the following at December 31, 2023:

Amortization expense for the years ended December 31, 2023 and 2022 was $149,975 and $149,974, respectively.

Annual amortization of intangible assets are as follows:

(9)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. 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 $1,750 for the membership interest and was subsequently reimbursed. As of December 31, 2023 and 2022, the Company has made an investment of $348,250 for a 19.9% membership interest.

(10)Leases

The following was included in our balance sheet as of December 31, 2023 and 2022:

The weighted average remaining lease term and weighted average discount rate at December 31, 2023 and 2022 were as follows:

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 December 31, 2023:

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 beextended on a month-by-month basis, commencing on February 1, 2021. The lease wasterminated 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 December 31, 2022. On April 13, 2023, this lease was terminated subject to the terms of a Surrender Agreement between the Company and landlord. As a result, a gain on termination of right-of-use operating lease was recognized of $8,461.

On November 27, 2019, the Company entered a 39-month agreement to lease an automobile with a monthly payment of $420. This lease was paid in full as of March 31, 2023.

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 a new lease for a 20,000 square foot facility at 155 Plant Avenue, Hauppauge, New York, for a term ofseven 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.

On August 9, 2023, the Company entered a 39-month agreement for $20,880 to lease an automobile with a monthly payment of $605.

The following table reconciles future minimum operating lease payments to the discounted lease liability as of December 31, 2023:

(11)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 December 31, 2023 and 2022, the balance of this promissory note was $80,841 and $183,014, respectively. Principal payments of $102,171 and $96,105 along with interest expense of $8,391 and $14,460 was paid during the years ended December 31, 2023 and 2022, respectively.

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:

As of March 14, 2023, the Company closed the equipment line of credit of $500,000, which had $0 balance. All UCC filings on the Company assets have been released as well as the President’s personal guarantee.

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 December 31, 2023 and 2022 was $0 and $41,700, respectively. Principal payments of $41,700 and 40,916 and interest expense of $430 and $1,215 was paid for the years ended December 31, 2023 and 2022, respectively.

Future principal payments over the term of the loans as of December 31, 2023 are as follows:

(12)Income Taxes

As of December 31, 2023 and 2022, the Company had net operating loss carry forwards of $7,010,000 and $6,700,000, respectively, that may be available to reduce future years’ taxable income indefinitely. Future tax benefits which may arise as a result of these losses have not been recognized in these consolidated financial statements, as their realization is determined not likely to occur. Accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards. For the years ending December 31, 2023 and 2022, the Company reflects a deferred tax liability in the amount of $24,000 and $0, respectively, due to the future tax liability from an asset with an indefinite life known as a “naked credit.” The future tax liability from this indefinite lived asset can be offset by up to 80% of net operating loss carryforwards created after 2017. The remaining portion of the future tax liability from indefinite lived assets cannot be used to offset definite lived deferred tax assets.

The components for the provision of income taxes include the following:

A reconciliation of the statutory US federal income tax rate to the Company’s effective income tax rate is as follows:

Deferred income taxes reflect the net tax effect of temporary differences between amounts recorded for financial reporting purposes and amounts used for tax purposes. The Company has a net cumulative current deferred tax asset of $0 and a net cumulative long-term deferred tax liability of $24,000. The major components of deferred tax assets and liabilities are as follows:

(13)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.

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 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.

On August 18, 2023, the Company granted restricted stock awards under the Company’s 2020 Plan to directors of the Company for an aggregate of 45,000 shares of common stock (15,000 each) valued at $82,800. These restricted stock awards vested immediately.

On December 20, 2023, the Company granted 25,000 restricted stock units at an exercise price of $1.73 under the Company’s 2020 Plan to a consultant. This restricted stock award vested immediately and the stock compensation was recorded under research and development.

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. As of December 30, 2023 and 2022,10,000 and 7,500 shares of common stock were issued, respectively.

On June 17, 2022, the Company granted restricted stock awards under the Company’s 2020 Plan to directors of the Company for an aggregate of 45,000 shares of common stock (15,000 each) valued at $88,650. These restricted stock awards vested immediately.

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.

In 2023, the Board and the shareholders adopted the Company’s Amended and Restated 2020 Equity Incentive Plan (the “Amended and Restated Plan”), effective as of December 11, 2023. The Amended and Restated Plan is substantially similar to the 2020 Plan except that it increases the shares of our common stock available for issuance thereunder to 2,250,000 shares of common stock.

Stock Options:

On February 27, 2023, the Company granted one employee ten-year stock options to purchase 2,000 shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over five years commencing on May 27, 2023, with an exercise price of $2.59 per share. The Company has calculated these options estimated fair market value at $4,800 using the Black-Scholes model, with the following assumptions: expected term of 7.46 years, stock price of $2.59, exercise price of $2.59, volatility of 126.8%, risk-free rate of 4.08%, and no forfeiture rate.

On May 1, 2023, the Company granted one employee ten-year stock options to purchase 5,000 shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over five years commencing on August 1, 2023, with an exercise price of $3.19 per share. The Company has calculated these options estimated fair market value at $14,800 using the Black-Scholes model, with the following assumptions: expected term of 7.51 years, stock price of $3.19, exercise price of $3.19, volatility of 126.0%, risk-free rate of 3.62%, and no forfeiture rate.

On June 5, 2023, the Company granted one employee ten-year stock options to purchase 2,000 shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over three years commencing on September 5, 2023, with an exercise price of $2.40 per share. The Company has calculated these options estimated fair market value at $4,200 using the Black-Scholes model, with the following assumptions: expected term of 5.50 years, stock price of $2.40, exercise price of $2.40, volatility of 127.3%, risk-free rate of 3.82%, and no forfeiture rate.

On June 12, 2023, the Company granted one employee ten-year stock options to purchase 3,000 shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over three years commencing on September 12, 2023, with an exercise price of $2.49 per share. The Company has calculated these options estimated fair market value at $6,600 using the Black-Scholes model, with the following assumptions: expected term of 5.50 years, stock price of $2.49, exercise price of $2.49, volatility of 127.0%, risk-free rate of 3.89%, and no forfeiture rate.

On August 18, 2023, the Company granted one employee ten-year stock options to purchase 5,000 shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over five years commencing on November 18, 2023, with an exercise price of $1.84 per share. The Company has calculated these options estimated fair market value at $8,500 using the Black-Scholes model, with the following assumptions: expected term of 7.51 years, stock price of $1.84, exercise price of $1.84, volatility of 122.5%, risk-free rate of 4.34%, and no forfeiture rate.

On September 25, 2023, the Company granted one employee ten-year stock options to purchase 3,000 shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over five years commencing on December 25, 2023, with an exercise price of $1.85 per share. The Company has calculated these options estimated fair market value at $5,100 using the Black-Scholes model, with the following assumptions: expected term of 7.51 years, stock price of $1.85, exercise price of $1.85, volatility of 122.5%, risk-free rate of 4.61%, and no forfeiture rate.

On October 2, 2023, the Company granted one employee ten-year stock options to purchase 5,000 shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over five years commencing on January 2, 2024, with an exercise price of $2.01 per share. The Company has calculated these options estimated fair market value at $9,300 using the Black-Scholes model, with the following assumptions: expected term of 7.51 years, stock price of $1.85, exercise price of $2.01, volatility of 122.4%, risk-free rate of 4.73%, and no forfeiture rate.

On December 20, 2023, the Company granted Mr. Maqbool ten-year stock options to purchase 100,000 shares of common stock according to the Company’s 2020 Plan. In addition, Ms. Sanfratello and Mr. Flores were each granted stock options to purchase 50,000 shares of common stock. The stock options vest in quarterly installments over a 5-year period with an exercise price of $1.73 per share. The Company has calculated these options estimated fair market value at $315,593 using the Black-Scholes model, with the following assumptions: expected term of 7.36 years, stock price of $1.73, exercise price of $1.73, volatility of 120.7%, risk-free rate of 3.88%, and no forfeiture rate.

On December 20, 2023, the Company granted two employees and one consultant ten-year stock options to purchase 95,000 shares of common stock according to the Company’s 2020 Plan. The stock options vest in quarterly installments over a 5-year period with an exercise price of $1.73 per share. The Company has calculated these options estimated fair market value at $149,907 using the Black-Scholes model, with the following assumptions: expected term of 7.36 years, stock price of $1.73, exercise price of $1.73, volatility of 120.7%, risk-free rate of 3.88%, and no forfeiture rate.

On May 20, 2022, the Company granted four employees five-year stock options to purchase shares of common stock (totaling 45,000) according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over five years commencing on the grant date, with an exercise price of $1.96 per share. The Company also granted two employees five-year stock options to purchase shares of common stock (totaling 2,000) according to the Company’s 2020 Plan. The stock options vest one year from date of grant at an exercise price of $1.96. In addition, the Company granted two advisors to the Board, ten-year stock options to purchase shares of common stock (totaling 35,000) according to the Company’s 2020 Plan. Twenty-five thousand (25,000) stock options vest immediately on date of grant at an exercise price of $1.96, and the balance of ten thousand (10,000) stock options vest in equal quarterly installments over one year commencing on the grant date. The Company has calculated these options estimated fair market value at $129,325 using the Black-Scholes model, with the following assumptions: expected term ranging from 2.5 to 4.9 years, stock price $1.96, exercise price $1.96, volatility ranging from 136.2% to 141.3%, risk-free rate ranging from 2.67% to 2.80%, and no forfeiture rate.

On June 14, 2022, the Company granted Mr. Maqbool five-year stock options to purchase 100,000 shares of common stock according to the Company’s 2020 Plan. In addition, Ms. Sanfratello and Mr. Flores were each granted five-year stock options to purchase 50,000 shares of common stock. The stock options vest in quarterly installments over a 5-year period with an exercise price of $1.72 per share. The Company has calculated these options estimated fair market value at $304,148 using the Black-Scholes model, with the following assumptions: expected term of 4.9 years, stock price of $1.72, exercise price of $1.72, volatility of 138.3%, risk-free rate of 3.61%, and no forfeiture rate.

On August 22, 2022, the Company granted Daniel Mazziota five-year stock options to purchase 25,000 shares of common stock according to the Company’s 2020 Plan. The stock options vest in quarterly installments over a 5-year period with an exercise price of $2.23 per share. The Company has calculated these options estimated fair market value at $47,787 using the Black-Scholes model, with the following assumptions: expected term of 4.5 years, stock price of $2.23, exercise price of $2.23, volatility of 134.5%, risk-free rate of 3.17%, and no forfeiture rate.

On December 19, 2022, the Company granted one employee ten-year stock options to purchase 3,000 shares of common stock according to the Company’s 2020 Plan. The stock options vest in equal quarterly installments over three years commencing on March 31, 2023 with an exercise price of $1.97 per share. The Company has calculated these options estimated fair market value at $5,275 using the Black-Scholes model, with the following assumptions: expected term of 5.5 years, stock price of $1.97, exercise price of $1.97, volatility of 132.2%, risk-free rate of 3.99%, and no forfeiture rate.

On December 20, 2022, the Company granted Mr. Maqbool ten-year stock options to purchase 100,000 shares of common stock according to the Company’s 2020 Plan. In addition, Ms. Sanfratello and Mr. Flores were each granted stock options to purchase 50,000 shares of common stock. The stock options vest in quarterly installments over a 5-year period with an exercise price of $1.92 per share. The Company has calculated these options estimated fair market value at $357,425 using the Black-Scholes model, with the following assumptions: expected term of 7.5 years, stock price of $1.92, exercise price of $1.92, volatility of 127.5%, risk-free rate of 3.79%, and no forfeiture rate.

On December 20, 2022, the Company granted Matthew Kappers, Andrew Lee and Daniel Mazziota ten-year stock options to purchase 5,000,5,000 and 7,500 shares of common stock respectively according to the Company’s 2020 Plan. The stock options vest in quarterly installments over a 5-year period with an exercise price of $1.92 per share. The Company has calculated these options estimated fair market value at $31,275 using the Black-Scholes model, with the following assumptions: expected term of 7.5 years, stock price of $1.92, exercise price of $1.92, volatility of 127.5%, risk-free rate of 3.79%, and no forfeiture rate.

On December 20, 2022, the Company granted eleven employees and one Board Advisor ten-year stock options to purchase 85,500 shares of common stock according to the Company’s 2020 Plan. The stock options vest in quarterly installments over a 5-year period with an exercise price of $1.92 per share. The Company has calculated these options estimated fair market value at $152,800 using the Black-Scholes model, with the following assumptions: expected term of 7.5 years, stock price of $1.92, exercise price of $1.92, volatility of 127.5%, risk-free rate of 3.79%, and no forfeiture rate

Below is a table summarizing the changes in stock options outstanding for the year ended December 31, 2023:

As of December 31, 2023, all outstanding stock options were issued according to the Company’s 2020 Plan, and there remains 869,000 shares of common stock available for future issuance under the 2020 Plan.

Stock-based compensation expense related to stock options of $248,996 and $244,631 was recorded for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the remaining unrecognized compensation cost related to non-vested stock options is $1,255,294 and is expected to be recognized over 4.76 years. The outstanding stock options have a weighted average remaining contractual life of 5.26 years and a total intrinsic value of $76,540.

Warrants:

Effective February 19, 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 sold at an offering price of $7.00 per unit. 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. The warrants expire ten years from the date of issuance.

Maxim Group LLC acted as sole book-running manager for the offering and partially exercised its overallotment option to purchase 205,714 warrants at the public offering price. The warrants expire ten years from the date of issuance.

Effective April 16, 2021, the Company entered into definitive agreements with certain institutional investors to sell 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.

On July 20, 2021, in connection with a product development agreement with an unrelated party, the Company issued warrants to purchase 30,000 shares of common stock. The warrants vest in one year from issuance, with an exercise price of $5.00 per share. The Company has calculated these warrants estimated fair market value at $88,803 using the Black-Scholes model, with the following assumptions: expected term 3.0 years, stock price $3.80, exercise price $5.00, volatility 149.8%, risk-free rate 0.37%, and no forfeiture rate.

Below is a table summarizing the changes in warrants outstanding for the year ended December 31, 2023:

Stock-based compensation expense related to warrants of $0 and $48,902 was recorded for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the remaining unrecognized compensation cost related to non-vested warrants is $0. The outstanding warrants have a weighted average remaining contractual life of 2.23 years and a total intrinsic value of $0.

Restricted Stock Units:

On August 18, 2023, the Company granted restricted stock awards under the Company’s 2020 Plan to directors of the Company for an aggregate of 45,000 shares of common stock (15,000 each) valued at $82,800. These restricted stock awards vested immediately.

On December 20, 2023,25,000 restricted stock units at an exercise price of $1.73 were issued to a consultant. This restricted stock award vested immediately.

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. As of December 31, 2023 and 2022,10,000 and 7,500 shares of common stock were issued, respectively.

On June 17, 2022, the Company granted restricted stock awards under the Company’s 2020 Plan to directors of the Company for an aggregate of 45,000 shares of common stock (15,000 each) valued at $88,650. These restricted stock awards vested immediately.

Below is a table summarizing the changes in restricted stock units outstanding for the year ended December 31, 2023:

Stock-based compensation expense related to restricted stock units of $140,662 and $105,593 was recorded for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the remaining unrecognized compensation cost related to non-vested restricted stock units is $27,245. The outstanding restricted stock units have a weighted average remaining contractual life of 1.14 years and a total intrinsic value of $0.

**(14)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.

The purchase agreement contained a revenue earnout adjustment. Within forty (40) days after December 31, 2022, AmpliTech prepared and delivered to Seller a statement setting forth its calculation of Two Years Net Revenues of the business, or the “Revenue Statement”. The revenue earnout adjustment was determined to be an amount equal to 25% of two years’ net revenues minus $20,000,000. If the revenue adjustment is a positive number, Buyer shall pay to Seller an amount equal to the revenue adjustment. If the revenue adjustment is a negative number, Seller shall pay to Buyer and amount equal to the revenue adjustment. As of December 31, 2022, the fair value of the revenue adjustment was determined to be $2,180,826, an increase of $815,788 as previously recorded as of December 31, 2021. This amount was owed to Seller and was recorded as a contingent liability as of December 31, 2022, and subsequently paid on March 20, 2023.

**(15)Subsequent events **

On January 15, 2024, the Company entered a triple net lease agreement for a 1,900 square foot facility in Allen, Texas for a term of five years and one month. The yearly base rent of $53,675 shall increase at a rate of 2.5% per year to begin on the first anniversary lease commencement date and each year thereafter. The first month’s rent shall be abated following the commencement lease date. Upon lease execution, the Company paid two months of rent as a security deposit and one month’s rent totaling $17,999. The Company expects to be fully operational at the new MMIC division facility May 1, 2024.

On January 20,2024, the current Board of Directors renewed their directors’ agreements and shall be issued 15,000 restricted stock units (RSU’s) pursuant to the Company’s 2020 Equity Incentive Plan.

On March 20, 2024, the Company amended the employment agreement with Jorge Flores to extend its term to March 20, 2027. The amendment was effective March 20, 2024.