U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
☐TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 000-55205
Alpine 4 Technologies Ltd.
(Exact name of registrant as specified in its charter)
Delaware | 46-5482689 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
2525 E Arizona Biltmore Circle, Suite 237 | |
Phoenix, AZ | 85016 |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant's telephone number, including area code: 855-777-0077 ext 801
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |
Emerging growth company | ☒ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐No ☒
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(1) of the Exchange Act. ☒
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of November 14, 2017,1, 2021, the issuer had 23,105,194149,609,780 shares of its Class A common stock issued and outstanding* and 1,600,000outstanding, 8,673,088 shares of its Class B common stock issued and outstanding. *(includes 350,000outstanding and 12,500,200 shares of ourits Class C common stock issued to a 3rd party for a loan but which are not considered outstanding for accounting purposes)and outstanding.
TABLE OF CONTENTS
PART I | Page | |
4 | ||
Management's Discussion and Analysis of Financial Condition and Results of Operations | 22 | |
28 | ||
28 | ||
28 | ||
29 | ||
30 | ||
30 | ||
30 | ||
32 |
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements and information in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 (the “Quarterly Report”) may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, which address activities, events, or developments that we expect or anticipate will or may occur in the future, including such things as future capital expenditures, commencement of business operations, business strategy, statements related to the expected effects on our business from the novel coronavirus (“COVID-19”) pandemic, and other similar matters are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “hope,” “intend,” “project,” “positioned,” or “strategy” or other comparable terminology. These forward-looking statements are based largely on our current expectations and assumptions and are subject to a number of risks and uncertainties, many of which are beyond our control. These statements are subject to many risks, uncertainties, and other important factors that could cause actual future results to differ materially from those expressed in the forward-looking statements including, but not limited to, the duration and scope of the COVID-19 pandemic and impact on the demand for the products we distribute; our ability to obtain the products from the manufacturer; actions governments, businesses, and individuals take in response to the pandemic, including mandatory business closures and restrictions on onsite commercial interactions; the impact of the COVID-19 pandemic and action taken in response to the pandemic on global and regional economies and economic activity; the pace of recovery when the COVID-19 pandemic subsides; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; our inability to sustain profitable sales growth; and circumstances or developments that may make us unable to implement or realize the anticipated benefits, or that may increase the costs, of our current and planned business initiatives. For a more thorough discussion of these risks, you should read this entire Report carefully, as well as the risks discussed under “Risk Factors” in our Annual Report for the year ended December 31, 2020.
Although management believes that the assumptions underlying the forward-looking statements included in this Report are reasonable, such statements do not guarantee our future performance, and actual results could differ from those contemplated by these forward-looking statements. The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. In the light of these risks and uncertainties, all of the forward-looking statements made herein are qualified by these cautionary statements, and there can be no assurance that the results and events contemplated by the forward-looking statements contained in this Report will in fact transpire. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We expressly disclaim any obligation to update or revise any forward-looking statements.
PART I - FINANCIAL INFORMATION
ALPINE 4 Technologies Ltd.
Successor | Successor | |||||||
September 30, 2017 | December 31, 2016 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash | $ | 63,372 | $ | 209,494 | ||||
Accounts receivable, net | 1,754,837 | 1,346,585 | ||||||
Inventory | 1,199,571 | 930,114 | ||||||
Prepaid expenses and other current assets | 184,942 | 39,734 | ||||||
Total current assets | 3,202,722 | 2,525,927 | ||||||
Property and equipment, net | 9,545,965 | 5,202,133 | ||||||
Intangible asset, net | 752,892 | 757,528 | ||||||
Goodwill | 2,131,606 | 1,963,761 | ||||||
Other non-current assets | 314,305 | 688,204 | ||||||
Total non-current assets | 12,744,768 | 8,611,626 | ||||||
TOTAL ASSETS | $ | 15,947,490 | $ | 11,137,553 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 2,055,385 | $ | 1,434,170 | ||||
Accrued expenses | 833,602 | 299,043 | ||||||
Deferred Revenue | 130,227 | 12,536 | ||||||
Derivative liabilities | 175,332 | - | ||||||
Deposits | 12,509 | 12,509 | ||||||
Notes payable | 3,561,978 | 1,332,031 | ||||||
Notes payable, related parties | 487,000 | 205,000 | ||||||
Convertible notes payable, net of discount of $76,097 and $7,421 | 2,042,732 | 247,359 | ||||||
Financing Lease Obligation | 24,133 | 13,814 | ||||||
Income Tax Payable | 19,819 | 20,123 | ||||||
Total current liabilities | 9,342,717 | 3,576,585 | ||||||
NON-CURRENT LIABILITIES: | ||||||||
Long-term debt | - | 147,079 | ||||||
Convertible notes payable | 1,694,627 | 1,760,198 | ||||||
Financing Lease Obligation | 6,546,645 | 6,572,579 | ||||||
Deferred Revenue | 53 | - | ||||||
Deferred tax liability | 287,153 | 287,153 | ||||||
Total non-current liabilities | 8,528,478 | 8,767,009 | ||||||
TOTAL LIABILITIES | 17,871,195 | 12,343,594 | ||||||
REDEEMABLE COMMON STOCK | ||||||||
Class A Common stock, $0.0001 par value, 379,403 and 0 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 1,439,725 | - | ||||||
STOCKHOLDERS' DEFICIT: | ||||||||
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding | - | - | ||||||
Class A Common stock, $0.0001 par value, 500,000,000 shares authorized, 21,950,791 and 21,474,481 shares issued and outstanding | 2,195 | 2,148 | ||||||
Class B Common stock, $0.0001 par value, 100,000,000 shares authorized, 1,600,000 and 1,600,000 shares issued and outstanding | 160 | 160 | ||||||
Additional paid-in capital | 16,329,087 | 16,228,106 | ||||||
Accumulated deficit | (19,694,872 | ) | (17,436,455 | ) | ||||
Total stockholders' deficit | (3,363,430 | ) | (1,206,041 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 15,947,490 | $ | 11,137,553 |
CONSOLIDATED BALANCE SHEETS
|
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|
| September 30, |
| December 31, |
|
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|
| 2021 |
| 2020 | |
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| (unaudited) |
|
|
ASSETS |
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| |||
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|
CURRENT ASSETS: |
|
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|
| |||
| Cash | $ | 5,425,913 | $ | 277,738 | ||
| Restricted cash |
| - |
| 444,845 | ||
| Accounts receivable, net |
| 12,990,229 |
| 6,484,869 | ||
| Contract assets |
| 3,655,625 |
| 717,421 | ||
| Inventory, net |
| 9,632,121 |
| 2,666,602 | ||
| Prepaid expenses and other current assets |
| 1,272,760 |
| 32,301 | ||
|
| Total current assets |
| 32,976,648 |
| 10,623,776 | |
|
|
|
|
|
|
|
|
Investment in equity securities |
| 1,350,000 |
| - | |||
Property and equipment, net |
| 27,320,596 |
| 19,299,286 | |||
Intangible asset, net |
| 29,001,665 |
| 7,743,084 | |||
Right of use assets, net |
| 347,712 |
| 581,311 | |||
Goodwill |
| 5,866,454 |
| 2,084,982 | |||
Other non-current assets |
| 248,257 |
| 401,744 | |||
|
|
|
|
|
|
|
|
| TOTAL ASSETS | $ | 97,111,332 | $ | 40,734,183 | ||
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|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
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| |||
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|
CURRENT LIABILITIES: |
|
|
|
| |||
| Accounts payable | $ | 5,653,158 | $ | 4,854,467 | ||
| Accrued expenses |
| 4,253,987 |
| 2,872,202 | ||
| Contract liabilities |
| 3,486,331 |
| 233,485 | ||
| Line of credit |
| 3,718,972 |
| - | ||
| Notes payable, current portion |
| 5,811,241 |
| 7,100,911 | ||
| Notes payable, related parties |
| 3,000 |
| 238,651 | ||
| Convertible notes payable, current portion, net of discount of $0 and $1,343,624 |
| 7,500 |
| 562,242 | ||
| Financing lease obligation, current portion |
| 628,574 |
| 639,527 | ||
| Operating lease obligation, current portion |
| 135,207 |
| 334,500 | ||
|
| Total current liabilities |
| 23,697,970 |
| 16,835,985 | |
|
|
|
|
|
|
|
|
Notes payable, net of current portion |
| 7,522,462 |
| 15,201,450 | |||
Convertible notes payable, net of current portion |
| - |
| 1,100,635 | |||
Financing lease obligations, net of current portion |
| 15,489,693 |
| 15,687,176 | |||
Operating lease obligations, net of current portion |
| 219,682 |
| 269,030 | |||
Deferred tax liability |
| 428,199 |
| 428,199 | |||
|
|
|
|
|
|
|
|
| TOTAL LIABILITIES |
| 47,358,006 |
| 49,522,475 | ||
|
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|
STOCKHOLDERS' EQUITY (DEFICIT): |
|
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| |||
| Preferred stock, $0.0001 par value, 5,000,000 shares authorized |
| - |
| - | ||
| Series B preferred stock; $1.00 stated value; 100 shares authorized, 5 and 5 shares issued and outstanding at September 30, 2021 and December 31, 2020 |
| 5 |
| 5 | ||
| Series C preferred stock; $3.50 stated value; 2,028,572 shares authorized, 1,714,286 and 1,714,286 shares issued and outstanding at September 30, 2021 and December 31, 2020 |
| 171 |
| 171 | ||
| Series D preferred stock; $3.50 stated value; 1,628,572 shares authorized, 1,432,244 and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020 |
| 143 |
| - | ||
| Class A Common stock, $0.0001 par value, 195,000,000 shares authorized, 146,214,650 and 126,363,158 shares issued and outstanding at September 30, 2021 and December 31, 2020 |
| 14,624 |
| 12,636 | ||
| Class B Common stock, $0.0001 par value, 10,000,000 shares authorized, 8,673,088 and 9,023,088 shares issued and outstanding at September 30, 2021 and December 31, 2020 |
| 867 |
| 902 | ||
| Class C Common stock, $0.0001 par value, 15,000,000 shares authorized, 12,500,200 and 14,162,267 shares issued and outstanding at September 30, 2021 and December 31, 2020 |
| 1,250 |
| 1,417 | ||
| Additional paid-in capital |
| 96,306,820 |
| 30,991,978 | ||
| Accumulated deficit |
| (46,570,554) |
| (39,795,401) | ||
|
| Total stockholders' equity (deficit) |
| 49,753,326 |
| (8,788,292) | |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ | 97,111,332 | $ | 40,734,183 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
ALPINE 4 Technologies Ltd.
Three month period | ||||||||
Successor | Successor | |||||||
Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | |||||||
Revenue | $ | 2,221,533 | $ | 2,258,099 | ||||
Cost of revenue (exclusive of depreciation) | 1,520,224 | 1,410,772 | ||||||
Gross Profit | 701,309 | 847,327 | ||||||
Operating expenses: | ||||||||
General and administrative expenses | 1,001,921 | 937,449 | ||||||
Depreciation | 173,693 | 104,455 | ||||||
Amortization | 31,354 | 10,901 | ||||||
Total operating expenses | 1,206,968 | 1,052,805 | ||||||
Loss from operations | (505,659 | ) | (205,478 | ) | ||||
Other expenses | ||||||||
Interest expense | 423,986 | 366,825 | ||||||
Gain on derivative liabilities | (72,361 | ) | - | |||||
Other (income) | (47,880 | ) | (49,173 | ) | ||||
Total other expenses | 303,745 | 317,652 | ||||||
Loss before income tax | (809,404 | ) | (523,130 | ) | ||||
Income tax expense (benefit) | 8,303 | (964 | ) | |||||
Net loss | $ | (817,707 | ) | $ | (522,166 | ) | ||
Weighted average shares outstanding : | ||||||||
Basic | 23,829,713 | 22,842,265 | ||||||
Diluted | 23,829,713 | 22,842,265 | ||||||
Loss per share | ||||||||
Basic | $ | (0.03 | ) | $ | (0.02 | ) | ||
Diluted | $ | (0.03 | ) | $ | (0.02 | ) |
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
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|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||
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| 2021 |
| 2020 |
| 2021 |
| 2020 | |
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Revenue |
|
| $ | 17,398,316 | $ | 8,729,633 | $ | 39,938,585 | $ | 26,608,093 | |
Cost of revenue |
|
|
| 12,950,180 |
| 7,390,406 |
| 30,771,770 |
| 21,553,106 | |
Gross Profit |
|
|
| 4,448,136 |
| 1,339,227 |
| 9,166,815 |
| 5,054,987 | |
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Operating expenses: |
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| ||
| General and administrative expenses |
| 5,539,465 |
| 1,911,278 |
| 17,719,228 |
| 7,225,280 | ||
| Impairment loss of intangible assets and goodwill |
| - |
| - |
| - |
| 1,111,600 | ||
| Research and development |
| 581,131 |
| - |
| 1,096,333 |
| - | ||
| Total operating expenses |
| 6,120,596 |
| 1,911,278 |
| 18,815,561 |
| 8,336,880 | ||
Loss from operations |
|
| (1,672,460) |
| (572,051) |
| (9,648,746) |
| (3,281,893) | ||
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Other income (expenses) |
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| Interest expense |
|
| (537,882) |
| (1,139,462) |
| (3,226,192) |
| (3,694,531) | |
| Change in value of derivative liability |
| - |
| - |
| - |
| 2,298,609 | ||
| Gain (loss) on extinguishment of debt |
| - |
| 253,063 |
| 803,079 |
| 344,704 | ||
| Gain on forgiveness of debt |
| 4,307,291 |
| - |
| 4,896,573 |
| - | ||
| Bargain purchase gain |
| - |
| 64,371 |
| - |
| 64,371 | ||
| Change in fair value of contingent consideration |
| - |
| - |
| - |
| 500,000 | ||
| Other income |
|
| 438,701 |
| (5,783) |
| 454,191 |
| 56,352 | |
| Total other income (expenses) |
| 4,208,110 |
| (827,811) |
| 2,927,651 |
| (430,495) | ||
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Income (loss) before income tax |
| 2,535,650 |
| (1,399,862) |
| (6,721,095) |
| (3,712,388) | |||
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Income tax |
|
| 54,058 |
| - |
| 54,058 |
| - | ||
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Net income (loss) |
|
| $ | 2,481,592 | $ | (1,399,862) | $ | (6,775,153) | $ | (3,712,388) | |
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Weighted average shares outstanding: |
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| |||
| Basic |
|
|
| 166,964,408 |
| 131,934,084 |
| 161,118,324 |
| 130,111,673 |
| Diluted |
|
|
| 168,627,907 |
| 131,934,084 |
| 161,118,324 |
| 138,238,550 |
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Basic income (loss) per share | $ | 0.01 | $ | (0.01) | $ | (0.04) | $ | (0.03) | |||
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Diluted income (loss) per share | $ | 0.01 | $ | (0.01) | $ | (0.04) | $ | (0.04) | |||
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
ALPINE 4 Technologies Ltd.HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(unaudited)
|
|
|
| Series B Preferred Stock |
| Series C Preferred Stock |
| Series D Preferred Stock |
| Class A Common |
| Class B Common |
| Class C Common |
| Additional |
| Accumulated |
| Total Stockholders’ | ||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | |||
Balance, December 31, 2020 |
| 5 | $ | 5 |
| 1,714,286 | $ | 171 |
| - | $ | - |
| 126,363,158 | $ | 12,636 |
| 9,023,088 | $ | 902 |
| 14,162,267 | $ | 1,417 | $ | 30,991,978 | $ | (39,795,401) | $ | (8,788,292) | ||
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Issuance of shares of common stock for cash, net of offering costs |
| - |
| - |
| - |
| - |
| - |
| - |
| 9,857,397 |
| 985 |
| - |
| - |
| - |
| - |
| 54,301,997 |
| - |
| 54,302,982 | ||
Issuance of shares of common stock for convertible note payable and accrued interest |
| - |
| - |
| - |
| - |
| - |
| - |
| 702,877 |
| 70 |
| - |
| - |
| - |
| - |
| 109,760 |
| - |
| 109,830 | ||
Issuance of shares of series D preferred stock for acquisition |
| - |
| - |
| - |
| - |
| 1,432,244 |
| 143 |
| - |
| - |
| - |
| - |
| - |
| - |
| 6,653,166 |
| - |
| 6,653,309 | ||
Repurchase of class C common stock |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| (45,000) |
| (5) |
| (185,845) |
| - |
| (185,850) | ||
Share-based compensation expense |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 19,341 |
| - |
| 19,341 | ||
Beneficial conversion feature on convertible notes |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 92,428 |
| - |
| 92,428 | ||
Net loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| (6,129,468) |
| (6,129,468) | ||
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Balance, March 31, 2021 |
| 5 |
| 5 |
| 1,714,286 |
| 171 |
| 1,432,244 |
| 143 |
| 136,923,432 |
| 13,691 |
| 9,023,088 |
| 902 |
| 14,117,267 |
| 1,412 |
| 91,982,825 |
| (45,924,869) |
| 46,074,280 | ||
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Issuance of shares of common stock for acquisitions |
| - |
| - |
| - |
| - |
| - |
| - |
| 643,010 |
| 64 |
| - |
| - |
| - |
| - |
| 2,535,007 |
| - |
| 2,535,071 | ||
Issuance of shares of common stock for convertible note payable and accrued interest |
| - |
| - |
| - |
| - |
| - |
| - |
| 5,295,308 |
| 534 |
| - |
| - |
| - |
| - |
| 1,419,034 |
| - |
| 1,419,568 | ||
Conversion of Class C to Class A |
| - |
| - |
| - |
| - |
| - |
| - |
| 1,617,067 |
| 162 |
| - |
| - |
| (1,617,067) |
| (162) |
| - |
| - |
| - | ||
Conversion of Class B to Class A |
| - |
| - |
| - |
| - |
| - |
| - |
| 350,000 |
| 35 |
| (350,000) |
| (35) |
| - |
| - |
| - |
| - |
| - | ||
Share-based compensation expense |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 7,988 |
| - |
| 7,988 | ||
Net loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| (3,127,277) |
| (3,127,277) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Balance, June 30, 2021 |
| 5 |
| 5 |
| 1,714,286 |
| 171 |
| 1,432,244 |
| 143 |
| 144,828,817 |
| 14,486 |
| 8,673,088 |
| 867 |
| 12,500,200 |
| 1,250 |
| 95,944,854 |
| (49,052,146) |
| 46,909,630 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Issuance of shares of common stock for convertible note payable and accrued interest |
| - |
| - |
| - |
| - |
| - |
| - |
| 1,385,833 |
| 138 |
| - |
| - |
| - |
| - |
| 357,362 |
| - |
| 357,500 | ||
Share-based compensation expense |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 4,604 |
| - |
| 4,604 | ||
Net loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 2,481,592 |
| 2,481,592 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Balance, September 30, 2021 |
| 5 | $ | 5 |
| 1,714,286 | $ | 171 |
| 1,432,244 | $ | 143 |
| 146,214,650 | $ | 14,624 |
| 8,673,088 | $ | 867 |
| 12,500,200 | $ | 1,250 | $ | 96,306,820 | $ | (46,570,554) | $ | 49,753,326 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019 |
| - | $ | - |
| - | $ | - |
| - | $ | - |
| 100,070,161 | $ | 10,007 |
| 5,000,000 | $ | 500 |
| 9,955,200 | $ | 996 | $ | 19,763,883 | $ | (31,745,528) | $ | (11,970,142) | ||
Issuance of shares of common stock for cash |
| - |
| - |
| - |
| - |
| - |
| - |
| 3,941,753 |
| 394 |
| - |
| - |
| - |
| - |
| 249,606 |
| - |
| 250,000 | ||
Issuance of shares of common stock for convertible note payable and accrued interest |
| - |
| - |
| - |
| - |
| - |
| - |
| 4,648,879 |
| 464 |
| - |
| - |
| - |
| - |
| 696,868 |
| - |
| 697,332 | ||
Issuance of shares of common stock for debt settlement |
| - |
| - |
| - |
| - |
| - |
| - |
| 1,617,067 |
| 162 |
| - |
| - |
| 1,617,067 |
| 162 |
| 330,204 |
| - |
| 330,528 | ||
Issuance of shares of common stock for penalty |
| - |
| - |
| - |
| - |
| - |
| - |
| 300,000 |
| 30 |
| - |
| - |
| - |
| - |
| 44,670 |
| - |
| 44,700 | ||
Issuance of shares of common stock for compensation |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 4,023,088 |
| 402 |
| - |
| - |
| 603,061 |
| - |
| 603,463 | ||
Issuance of shares of series B preferred stock |
| 5 |
| 5 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 5 | ||
Share-based compensation expense |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 19,556 |
| - |
| 19,556 | ||
Net income |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 250,388 |
| 250,388 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Balance, March 31, 2020 |
| 5 |
| 5 |
| - |
| - |
| - |
| - |
| 110,577,860 |
| 11,057 |
| 9,023,088 |
| 902 |
| 11,572,267 |
| 1,158 |
| 21,707,848 |
| (31,495,140) |
| (9,774,170) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Share-based compensation expense |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 19,556 |
| - |
| 19,556 | ||
Net loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| (2,562,914) |
| (2,562,914) | ||
Balance, June 30, 2020 |
| 5 |
| 5 |
| - |
| - |
| - |
| - |
| 110,577,860 |
| 11,057 |
| 9,023,088 |
| 902 |
| 11,572,267 |
| 1,158 |
| 21,727,404 |
| (34,058,054) |
| (12,317,528) | ||
Issuance of shares of common stock for cash |
| - |
| - |
| - |
| - |
| - |
| - |
| 3,000,000 |
| 300 |
| - |
| - |
| - |
| - |
| 123,700 |
| - |
| 124,000 | ||
Share-based compensation expense |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 19,770 |
| - |
| 19,770 | ||
Net loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| (1,399,862) |
| (1,399,862) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Balance, September 30, 2020 |
| 5 | $ | 5 |
| - | $ | - |
| - | $ | - |
| 113,577,860 | $ | 11,357 |
| 9,023,088 | $ | 902 |
| 11,572,267 | $ | 1,158 | $ | 21,870,874 | $ | (35,457,916) | $ | (13,573,620) |
Nine month period | ||||||||||||
Successor | Successor | Predecessor | ||||||||||
Nine Months Ended January, 1, 2017 to September 30, 2017 | Six Months Ended April, 1, 2016 to September 30, 2016 | Three Months Ended January, 1, 2016 to March 31, 2016 | ||||||||||
Revenue | $ | 7,044,806 | $ | 4,294,535 | $ | 1,788,654 | ||||||
Cost of revenue (exclusive of depreciation) | 4,661,163 | 2,730,395 | 1,383,031 | |||||||||
Gross Profit | 2,383,643 | 1,564,140 | 405,623 | |||||||||
Operating expenses: | ||||||||||||
General and administrative expenses | 3,238,927 | 2,858,163 | 533,894 | |||||||||
Depreciation | 498,732 | 175,625 | 33,492 | |||||||||
Amortization | 69,060 | 21,734 | - | |||||||||
Total operating expenses | 3,806,719 | 3,055,522 | 567,386 | |||||||||
Loss from operations | (1,423,076 | ) | (1,491,382 | ) | (161,763 | ) | ||||||
Other expenses | ||||||||||||
Interest expense | 1,080,476 | 627,515 | 456 | |||||||||
Gain on derivative liabilities | (72,361 | ) | - | - | ||||||||
Other (income) | (181,444 | ) | (101,121 | ) | - | |||||||
Total other expenses | 826,671 | 526,394 | 456 | |||||||||
Loss before income tax | (2,249,747 | ) | (2,017,776 | ) | (162,219 | ) | ||||||
Income tax expense (benefit) | 8,670 | 7,411 | (31,770 | ) | ||||||||
Net loss | $ | (2,258,417 | ) | $ | (2,025,187 | ) | $ | (130,449 | ) | |||
Weighted average shares outstanding : | ||||||||||||
Basic | 23,589,017 | 22,760,422 | - | |||||||||
Diluted | 23,589,017 | 22,760,422 | - | |||||||||
Loss per share | ||||||||||||
Basic | $ | (0.10 | ) | $ | (0.09 | ) | $ | |||||
Diluted | $ | (0.10 | ) | $ | (0.09 | ) | $ |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
ALPINE 4 Technologies Ltd.
Nine month period | ||||||||||||
Successor | Successor | Predecessor | ||||||||||
Nine Months Ended January, 1, 2017 to September 30, 2017 | Six Months Ended April, 1, 2016 to September 30, 2016 | Three Months Ended January, 1, 2016 to March 31, 2016 | ||||||||||
OPERATING ACTIVITIES: | ||||||||||||
Net loss | $ | (2,258,417 | ) | $ | (2,025,187 | ) | $ | (130,449 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Depreciation | 498,732 | 175,625 | 33,492 | |||||||||
Amortization | 69,060 | 21,734 | - | |||||||||
Loss on disposal of fixed assets | 7,949 | - | - | |||||||||
Gain on derivatives | (72,361 | ) | - | - | ||||||||
Employee stock compensation | 69,290 | 1,062,500 | - | |||||||||
Stock issued for services | 21,170 | 406,740 | - | |||||||||
Amortization of debt issuance | 22,500 | 4,493 | - | |||||||||
Amortization of debt discounts | 76,322 | 226,913 | - | |||||||||
Change in current assets and liabilities: | ||||||||||||
Accounts receivable | (194,192 | ) | (303,735 | ) | 47,578 | |||||||
Inventory | (269,457 | ) | 179,293 | (14,062 | ) | |||||||
Prepaids | (90,370 | ) | (110,748 | ) | (41,040 | ) | ||||||
Accounts payable | 621,216 | 149,813 | 16,468 | |||||||||
Accrued expenses | 508,149 | 244,388 | 56,723 | |||||||||
Deferred tax | (304 | ) | - | (41,645 | ) | |||||||
Deferred revenue | 117,744 | (998 | ) | - | ||||||||
Net cash provided by (used in) operating activities | (872,969 | ) | 30,831 | (72,935 | ) | |||||||
INVESTING ACTIVITIES: | ||||||||||||
Capital expenditures | (183,125 | ) | (169,500 | ) | - | |||||||
Proceeds from insurance claim on Automobiles & Trucks | 86,807 | - | - | |||||||||
Acquisition, net of cash acquired | (1,937,616 | ) | (2,800,000 | ) | - | |||||||
Net cash used in investing activities | (2,033,934 | ) | (2,969,500 | ) | - | |||||||
FINANCING ACTIVITIES: | ||||||||||||
Proceeds from issuances of notes payable, related party | 105,500 | - | - | |||||||||
Proceeds from issuances of notes payable, non-related party | 1,952,392 | - | - | |||||||||
Repayments of notes payable, non-related party | (289,195 | ) | - | - | ||||||||
Proceeds from Line of Credit | 7,156,259 | 2,499,847 | ||||||||||
Repayments on Line of Credit | (6,736,589 | ) | (1,834,482 | ) | ||||||||
Repayments of notes payable, related party | (123,500 | ) | (1,535 | ) | (10,000 | ) | ||||||
Repayments of convertible notes | (66,370 | ) | (43,323 | ) | (59,461 | ) | ||||||
Proceeds from convertible notes payable | 389,000 | 12,500 | - | |||||||||
Proceeds from the sale of common stock | 15,000 | 6,000 | - | |||||||||
Net Proceeds from financing obligation lease, net of commissions and financing charges | - | 2,704,260 | ||||||||||
Change in restricted cash | 373,899 | (532,969 | ) | - | ||||||||
Cash paid for rent deposit on lease of building | - | (46,667 | ) | |||||||||
Cash paid on financing lease obligation | (15,615 | ) | (49,966 | ) | - | |||||||
Net cash provided by (used in) financing activities | 2,760,781 | 2,713,665 | (69,461 | ) | ||||||||
NET INCREASE (DECREASE) IN CASH | (146,122 | ) | (225,004 | ) | (142,396 | ) | ||||||
CASH, BEGINNING BALANCE | 209,494 | 342,786 | 365,221 | |||||||||
CASH, ENDING BALANCE | $ | 63,372 | $ | 117,782 | $ | 222,825 | ||||||
CASH PAID FOR: | ||||||||||||
Interest | $ | 570,614 | $ | 217,791 | $ | 456 | ||||||
Income taxes | $ | 1,104 | $ | - | $ | 47,500 | ||||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: | ||||||||||||
Common stock issued for convertible note payable and accrued interest | $ | 57,320 | $ | 159,830 | $ | - | ||||||
Issuance of Convertible Note for acquisition of QCA | $ | - | $ | 2,000,000 | $ | |||||||
Purchase of building from lease proceeds | $ | - | $ | 3,895,000 | $ | |||||||
Issuance of Convertible Note for acquisition of HWT | $ | 1,500,000 | $ | - | $ | - | ||||||
Issuance of Note Payable for acquisition of HWT | $ | 300,000 | $ | - | $ | - | ||||||
Issuance of Warrants for acquisition of HWT | $ | 40,941 | $ | - | $ | - | ||||||
Issuance of Redeemable Common Stock for acquisition of HWT | $ | 1,439,725 | $ | - | $ | - | ||||||
Debt discount from convertible note payable | $ | 30,000 | $ | 113,810 | $ | - | ||||||
Debt discount due to derivative liabilities | $ | 115,000 | $ | - | $ | - | ||||||
Reclassification of warrants embedded conversion options as derivative liability | $ | 132,693 | $ | - | $ | - |
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
| Nine Months Ended September 30, | ||
|
|
|
|
| 2021 |
| 2020 | |
OPERATING ACTIVITIES: |
|
|
|
| ||||
| Net loss |
| $ | (6,775,153) | $ | (3,712,388) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
| |||
|
| Depreciation and amortization |
|
| 2,851,969 |
| 1,582,604 | |
|
| Gain on extinguishment of debt |
| (803,079) |
| (344,704) | ||
|
| Gain of forgiveness of debt |
| (4,896,573) |
| - | ||
|
| Change in fair value of contingent consideration |
| - |
| (500,000) | ||
|
| Change in fair value of derivative liabilities |
| - |
| (2,298,609) | ||
|
| Stock issued for penalties |
| - |
| 44,700 | ||
|
| Employee stock compensation |
| 31,933 |
| 58,887 | ||
|
| Amortization of debt discounts |
| 1,436,052 |
| 507,534 | ||
|
| Non-cash lease expense |
| 328,628 |
| 200,165 | ||
|
| Bargain purchase gain |
| - |
| (64,371) | ||
|
| Impairment loss of intangible asset and goodwill |
| - |
| 1,111,600 | ||
|
| Write off of inventory |
| - |
| 127,919 | ||
|
| Change in current assets and liabilities: |
|
|
|
| ||
|
|
| Accounts receivable |
| (6,096,678) |
| 2,542,306 | |
|
|
| Inventory |
| (4,343,866) |
| (146,925) | |
|
|
| Contract assets |
| (2,111,973) |
| 158,978 | |
|
|
| Prepaid expenses and other assets |
| (696,471) |
| 141,147 | |
|
|
| Accounts payable |
| (17,460) |
| (661,933) | |
|
|
| Accrued expenses |
| 1,045,007 |
| 159,828 | |
|
|
| Contract liabilities |
| (835,632) |
| (71,548) | |
|
|
| Operating lease liability |
| (343,670) |
| (189,503) | |
|
|
| Deposits |
|
| - |
| (12,509) |
| Net cash used in operating activities |
| (21,226,966) |
| (1,366,822) | |||
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
| ||||
|
| Capital expenditures |
| (2,970,087) |
| (75,670) | ||
|
| Cash paid for equity investment |
| (350,000) |
| - | ||
|
| Cash paid for acquisitions |
| (16,824,000) |
| (2,513,355) | ||
|
| Cash assumed in acquisition |
| 81,442 |
| - | ||
| Net cash used in investing activities |
| (20,062,645) |
| (2,589,025) | |||
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
| ||||
|
| Proceeds from the sale of common stock, net of offering costs |
| 54,302,982 |
| 374,000 | ||
|
| Proceeds from issuances of notes payable, related parties |
| - |
| 47,000 | ||
|
| Proceeds from issuances of notes payable, non-related party |
| 15,609 |
| 4,644,817 | ||
|
| Proceeds from issuances of convertible notes payable |
| 408,000 |
| - | ||
|
| Proceeds from line of credit |
| 3,718,972 |
| - | ||
|
| Proceeds from financing lease |
| - |
| 2,000,000 | ||
|
| Repurchase of common stock |
| (185,850) |
| - | ||
|
| Repayments of notes payable, related party |
| (235,651) |
| (217,822) | ||
|
| Repayments of notes payable, non-related parties |
| (7,041,401) |
| (1,745,647) | ||
|
| Repayments of convertible notes payable |
| (1,680,964) |
| (270,294) | ||
|
| Repayment of line of credit |
| (2,821,033) |
| (660,764) | ||
|
| Cash paid on financing lease obligations |
| (487,723) |
| (355,094) | ||
| Net cash provided by financing activities |
| 45,992,941 |
| 3,816,196 | |||
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH |
| 4,703,330 |
| (139,651) | ||||
|
|
|
|
|
|
|
|
|
CASH AND RESTRICTED CASH, BEGINNING BALANCE |
| 722,583 |
| 302,486 | ||||
|
|
|
|
|
|
|
|
|
CASH AND RESTRICTED CASH, ENDING BALANCE | $ | 5,425,913 | $ | 162,835 | ||||
|
|
|
|
|
|
|
|
|
CASH PAID FOR: |
|
|
|
|
| |||
| Interest |
| $ | 1,593,255 | $ | 2,857,895 | ||
| Income taxes |
| $ | 54,058 | $ | - | ||
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING: |
|
| ||||||
| Penalty interest added to debt | $ | - | $ | 15,000 | |||
| Common stock issued for convertible note payable and accrued interest | $ | 1,886,898 | $ | 697,332 | |||
| Common stock issued for debt settlement | $ | - | $ | 330,528 | |||
| Issuance of note payable for acquisition | $ | - | $ | 2,300,000 | |||
| Common stock issued for acquisition | $ | 2,535,071 | $ | - | |||
| Common stock issued to settle unpaid salaries | $ | - | $ | 603,463 | |||
| ROU asset and operating lease obligation recognized under Topic 842 | $ | 95,029 | $ | 193,541 | |||
| Remeasurement of finance lease liability | $ | 279,287 | $ | - | |||
| Equipment purchased on financing lease | $ | - | $ | 756,990 | |||
| Mortgage on property purchase | $ | 4,680,000 | $ | - | |||
| Accounts receivable converted to equity investment | $ | 1,000,000 | $ | - | |||
| Other asset reclassified to fixed asset | $ | - | $ | 86,471 | |||
| Issuance of shares of series D preferred stock for acquisition | $ | 6,653,309 | $ | - | |||
| Interest added to note payable – related party | $ | - | $ | 134,185 | |||
| Beneficial conversion feature on convertible notes | $ | 92,428 | $ | - |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
Alpine 4 Technologies Ltd.
Notes to Unaudited Consolidated Financial Statements
For the ThreeNine Months Ended September 30, 2017
Note 1 – Organization and Basis of Presentation
The unaudited consolidated financial statements were prepared by Alpine 4 Technologies Ltd. (theHoldings, Inc. (‘we,” “our,” or the "Company"), pursuant to the rules and regulations of the Securities Exchange Commission ("SEC"). The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") were omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K filed with the SEC on April 14, 2017.15, 2021. The results for the three and nine months ended September 30, 2017,2021, are not necessarily indicative of the results to be expected for the year ending December 31, 2017.
The Company was incorporated under the laws of the State of Delaware on April 22, 2014. The Company was formed to serve as a vehicle to affect an asset acquisition, merger, exchange of capital stock, or other business combination with a domestic or foreign business. On March 2, 2021, the Company changed its name from Alpine 4 Technologies Ltd. to Alpine 4 Holdings, Inc.
Effective April 1, 2016, the Company purchased all of the outstanding capital stock of Quality Circuit Assembly, Inc., a California corporation (“QCA”).
Effective January 1, 2019, the Company purchased all of the outstanding capital stock or equity interests in Morris Sheet Metal Corp., an Indiana corporation (“MSM”); JTD Spiral, Inc., an Indiana corporation wholly owned by MSM; Morris Enterprises LLC, an Indiana limited liability company; and Morris Transportation LLC, an Indiana limited liability company (collectively “Morris”).
Effective November 6, 2019, the Company purchased all of the outstanding capital stock and units of Deluxe Sheet Metal, Inc., an Indiana corporation, and DSM Holding, LLC, an Indiana limited liability company; and purchased certain real estate from Lonewolf Enterprises, LLC, an Indiana limited liability company (collectively “Deluxe”).
Effective February 21, 2020, the Company purchased all of the outstanding units of Excel Fabrication, LLC., an Idaho limited liability company (“Excel”). Excel subsequently changed its name to Excel Construction Services, LLC.
Effective December 15, 2020, the Company purchased the assets of Impossible Aerospace Corporation, a Delaware corporation (“IA”).
Effective February 8, 2021, the Company purchased the assets of Vayu (US), Inc., a Delaware corporation (“Vayu”).
On May 5, 2021, the Company acquired all of the outstanding shares of stock of Thermal Dynamics, Inc., a Delaware corporation (“TDI”).
On May 10, 2021, the Company acquired all of the outstanding membership interests of KAI Enterprises, LLC, a Florida limited liability company, the sole asset of which was all of the outstanding membership interests of Alternative Laboratories, LLC, a Delaware limited liability company (“Alt Labs”).
On October 20, 2021, after the period covered by this Report, the Company acquired 100% of the outstanding shares of Identified Technologies Corporation, a Delaware corporation (“Identified Technologies”).
As of the date of this Report, the Company iswas a technology holding company owning, three companies (ALTIA, LLC, directly or indirectly, eleven companies:
·A4 Corporate Services, LLC;
·ALTIA, LLC;
·Quality Circuit Assembly, Inc. ("QCA");
·Morris Sheet Metal, Corp;
·JTD Spiral, Inc.;
·Excel Construction Services, LLC;
·SPECTRUMebos, Inc.;
·Vayu (US);
·Thermal Dynamics, Inc.;
·Alternative Laboratories, LLC.; and Horizon Well Testing, LLC ("HWT")). For 2016, QCA made up most
·Identified Technologies Corporation.
Basis of the revenue disclosed in the consolidated financial statements. HWT was not acquired until January 1, 2017, so it is not combined in our 2016 financial statements.
The accompanying consolidated financial statements herein are presented under predecessor entity reporting and, becausepresent the acquiring entity had nominalbalance sheets, statements of operations, as compared with the acquired company, QCA, prior historical information of the acquirer is not presented.
Liquidity
The Company’s financial statements are prepared in accordance with U.S. GAAP applicable to a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business within one year after the date the consolidated financial positionstatements are issued.
In accordance with Financial Accounting Standards Board (the “FASB”), Accounting Standards Update (“ASU”) No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40), our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.
While the Company experienced a loss for the nine months ended September 30, 2021, of $6.8 million, and had a negative cash flow used in operations, there were several significant one-time / non-recurring items included in the $6.8 million net loss. These non-recurring items totaled $2.2 million, consisting of $350 thousand in new acquisitions expenses captured in professional fees, and other costs, and $1.8 million for repurchase of RSUs.
The Company received a total of approximately $54.0 million in February 2021 in the following two transactions:
·The Company raised approximately $45.0 million in net proceeds in connection with a registered direct offering of its stock and;
·The Company raised approximately $9.0 million in net proceeds in connection with an equity line of credit financing arrangement.
The Company has secured bank financing totaling $9.3 million ($8.3 million in Lines of Credit and $1.0 million in capital expenditures lines of credit availability) of which $5.6 million was unused at September 30, 2021.
The Company plans to continue to generate additional revenue (and improve cash flows from operations) partly from the acquisitions of three operating companies which closed in May 2021 and October 2021 combined with improved gross profit performance from the existing operating companies.
Based on the capital raise as indicated above and management’s plans to improve cash flows from operations, management believes the Company has sufficient working capital to satisfy the Company’s estimated liquidity needs for the next 12 months. The Company ended the September 30, 2021, quarter with approximately $5.4 million in cash and working capital of $9.3 million. As of the date of this Report, the Company ashad approximately $3.5 million in cash. During the nine months ended September 30, 2021, the Company paid down liabilities of April 1, 2016approximately $13.1 million. In addition, approximately $7.2 million was used to build inventory and subsequent balance sheet dates are referredfor capital expenditures.
However, there is no assurance that management’s plans will be successful due to herein as "Successor" consolidated financial information.
Note 2 - Summary of Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries as of September 30, 2017,2021 and December 31, 2016, significant2020. Significant intercompany balances and transactions have been eliminated.
Use of presentation
The accompanyingconsolidated financial statements present the balance sheets, statements of operations, stockholders' deficit and cash flows of the Company. The financial statements have beenare prepared in accordance with U.S. GAAP.
statement presentation, financial condition, results of operations and cash flows will be affected. The ultimate impact from COVID-19 on the Company’s operations and financial results during 2021 will depend on, among other things, the ultimate severity and scope of the pandemic, the pace at which governmental and private travel restrictions and public concerns about public gatherings will ease, and the speed with which the economy recovers. The Company is not able to fully quantify the impact that these factors will have been reclassified to conform toon the current period presentation. These reclassifications had noCompany’s financial results during 2021 and beyond. COVID-19 did have a negative impact on net earningsthe Company’s financial performance in 2020. During the nine months ended September 30, 2021, there was no impairment charge related to intangible assets and financial position.
Cash
Cash and cash equivalents consist of cash and short-term investments with original maturities of less than 90 days. Cash equivalents are placed with high credit quality financial institutions and are primarily in money market funds. The carrying value of those investments approximates fair value. As of September 30, 2017,2021, and December 31, 2016,2020, the Company had no cash equivalents.
The following table sets forth a reconciliation of cash, and restricted cash reported in the consolidated statements of cash flows that agrees to the total of those amounts presented in the consolidated statements of cash flows.
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| September 30, |
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| December 31, |
| 2021 |
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| 2020 | |
Cash | $ | 5,425,913 |
| $ | 277,738 |
Restricted cash |
| - |
|
| 444,845 |
Total cash and restricted cash shown in statement of cash flows | $ | 5,425,913 |
| $ | 722,583 |
Major Customers
The Company had two customers that made up approximately 50%16% and 18%, respectively, of total revenues. For the three months endedaccounts receivable as of September 30, 2017 (Successor)2021. The Company had two customers that made up 10% and 8%, andrespectively, of accounts receivable as of December 31, 2020.
For the nine months ended September 30, 2017 (Successor),2021 and 2020, the Company had one customer that made up approximately 43%13% and 37%10% of total revenues, respectively. All other customers were less than 10% each of total revenues
Fair value measurements
Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in each period.
Inventory | ||||||||
Sep 30, 2017 | Dec 31, 2016 | |||||||
Raw materials | $ | 607,818 | $ | 527,599 | ||||
WIP | 389,586 | 193,525 | ||||||
Finished goods | 189,167 | 195,990 | ||||||
In Transit | 13,000 | 13,000 | ||||||
$ | 1,199,571 | $ | 930,114 |
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets which range from ten years to 39 years as follows:
Level 3 – Unobservable inputs that are supported by little or no market activity and repair coststhat are charged against income as incurred. Significant improvementsfinancial instruments whose values are determined using pricing models, discounted cash flow methodologies, or betterments are capitalized and depreciated over the estimated life of the asset.
Property and Equipment | ||||||||
Sep 30, 2017 | Dec 31, 2016 | |||||||
Automobiles & Trucks | $ | 1,354,435 | $ | - | ||||
Machinery & Equipment | 4,492,235 | 1,263,941 | ||||||
Office furniture & fixtures | 7,057 | - | ||||||
Building | 3,945,952 | 3,895,000 | ||||||
Land | 126,347 | - | ||||||
Leasehold Improvements | 294,524 | 219,045 | ||||||
Less: Accumulated Depreciation | (674,585 | ) | (175,853 | ) | ||||
$ | 9,545,965 | $ | 5,202,133 |
Intangibles | ||||||||
Sep 30, 2017 | Dec 31, 2016 | |||||||
Software | $ | 255,724 | $ | 191,300 | ||||
Noncompete | 100,000 | 100,000 | ||||||
Customer Lists | 531,187 | 531,187 | ||||||
Less: Accumulated Amortization | (134,019 | ) | (64,959 | ) | ||||
$ | 752,892 | $ | 757,528 |
Other Long-Lived Assets | ||||||||
Sep 30, 2017 | Dec 31, 2016 | |||||||
Restricted Cash | $ | 255,709 | $ | 630,270 | ||||
Deposits | 58,596 | 57,934 | ||||||
$ | 314,305 | $ | 688,204 |
The Company's financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, convertible notes, notes payable and linelines of credit. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements. For additional information, please see Note 11 – Derivative Liabilities
The carrying value of long-term debt approximates fair value since the related rates of interest approximate current market rates. As of September 30, 2021 and Fair Value Measurements.
Equity Investments
The Company’s equity investments consist of investment in one private company in which the Company does not have the ability to exercise significant influence over their operating and financial activities. This investment is carried at cost as an operating lease, a capital leasethere is no market for the common stock and LLC membership units, accordingly, no quoted market price is available. The investment is tested for impairment, at least annually, and more frequently upon the occurrences of certain events.
The Company has adopted the provisions of ASU 2016-01 and values the investment using the measurement alternative, defined as cost, less any impairment, plus or a financing transaction.
Research and Development
The Company focuses on quality control and development of new products and the improvement of existing products. All cost related to research and development activities are expensed as incurred. During the nine months ended September 30, 2021, research and development cost totaled $1,096,333.
Earnings (loss) per share
The Company presents both basic and diluted net income (loss) per commonshare on the face of the consolidated statements of operations. Basic net income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted-averageweighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed by dividing income availablecalculations give effect to common shareholders by the weighted-average number ofall potentially dilutive shares of common stock outstanding during the period, increased to includeincluding stock options and warrants, and using the numbertreasury-stock method. If antidilutive, the effect of additionalpotentially dilutive shares of common stock that would have been outstanding if potentially dilutive securities had been issued.is ignored. The only potentially dilutive securities outstanding during the periods presented were the convertible debentures, but they are anti-dilutive due todebt, options and warrants. The following table illustrates the net loss incurred. Allcomputation of basic and diluted earnings (loss) per common share have been adjusted retroactively for all periods presented to reflect changes in number of shares as a result of the reverse stock split amount.
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| For the Three Months Ended September 30, 2021 |
| For the Three Months Ended September 30, 2020 | |||||||||
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| Net Income |
| Shares |
| Per Share Amount |
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| Net loss |
| Shares |
| Per Share Amount |
Basic EPS |
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Net income (loss) | $ | 2,481,592 |
| 166,964,408 | $ | 0.01 |
| $ | (1,399,862) |
| 131,934,084 | $ | (0.01) |
Effect of Dilutive Securities |
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Stock options and warrants |
| - |
| 1,663,499 |
| - |
|
| - |
| - |
| - |
Dilute EPS |
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Net income (loss) plus |
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assumed conversions | $ | 2,481,592 |
| 168,627,907 | $ | 0.01 |
| $ | (1,399,862) |
| 131,934,084 | $ | (0.01) |
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| For the Nine Months Ended September 30, 2021 |
| For the Nine Months Ended September 30, 2020 | |||||||||
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| Net loss |
| Shares |
| Per Share Amount |
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| Net loss |
| Shares |
| Per Share Amount |
Basic EPS |
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Net loss | $ | (6,775,153) |
| 161,118,324 | $ | (0.04) |
| $ | (3,712,388) |
| 130,111,673 | $ | (0.03) |
Effect of Dilutive Securities |
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Convertible debt |
| - |
| - |
| - |
|
| (1,557,294) |
| 8,126,877 |
| (0.01) |
Dilute EPS |
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Net loss plus |
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assumed conversions | $ | (6,775,153) |
| 161,118,324 | $ | (0.04) |
| $ | (5,269,682) |
| 138,238,550 | $ | (0.04) |
Note 3 – Going Concern
The accompanying financial statements have been prepared onCompany determines whether a going concern basis. The working capitalcontract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company is currently negative and causes doubtuses the rate implicit in the lease to discount lease payments to present value; however, most of the ability forCompany’s leases do not provide a readily determinable implicit rate. Therefore, the Company to continue. The Company requires capital formust discount lease payments based on an estimate of its operational and marketing activities. The Company's ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company's plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
As of September 30, 2017,2021, the future minimum capitalfinance and operating lease and financing transaction payments net of amortization of debt issuance costs, arewere as follows:
Fiscal Year | ||||
2017 | $ | 143,500 | ||
2018 | 584,763 | |||
2019 | 599,382 | |||
2020 | 614,366 | |||
2021 | 629,725 | |||
Thereafter | 7,961,289 | |||
Total | 10,533,025 | |||
Less: Current capital leases and financing transaction | (24,133 | ) | ||
Less: imputed interest | (3,962,247 | ) | ||
Noncurrent capital leases and financing transaction | $ | 6,546,645 |
|
| Finance |
| Operating |
Twelve Months Ending September 30, |
| Leases |
| Leases |
2022 | $ | 1,895,925 | $ | 175,319 |
2023 |
| 1,923,246 |
| 104,648 |
2024 |
| 1,946,100 |
| 106,680 |
2025 |
| 1,911,278 |
| 53,848 |
2026 |
| 1,859,102 |
| - |
Thereafter |
| 17,239,539 |
| - |
Total payments |
| 26,775,190 |
| 440,495 |
Less: imputed interest |
| (10,656,923) |
| (85,606) |
Total obligation |
| 16,118,267 |
| 354,889 |
Less: current portion |
| (628,574) |
| (135,207) |
Non-current financing leases obligations | $ | 15,489,693 | $ | 219,682 |
As of October 1, 2020, the American Precision Fabricators, Inc. (“APF”) building lease with Harbor Island Properties, LLC was modified, assignment was transferred to Excel Fabrication, LLC (“Excel”), and Quality Circuit Assembly, Inc. (“QCA”). As part of the modification, the lease was extended through 2037 and the payment terms were amended effective January 15,
Operating Leases
The table below presents the lease related assets and liabilities recorded on the Company’s consolidated balance sheetsheets as of September 30, 2017.
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| September 30, |
| December 31, |
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| Classification on Balance Sheet |
| 2021 |
| 2020 |
Assets |
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Operating lease assets | Operating lease right of use assets | $ | 347,712 | $ | 581,311 | |
Total lease assets |
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| $ | 347,712 | $ | 581,311 |
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Liabilities |
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Current liabilities |
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Operating lease liability | Current operating lease liability | $ | 135,207 | $ | 334,500 | |
Noncurrent liabilities |
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Operating lease liability | Long-term operating lease liability |
| 219,682 |
| 269,030 | |
Total lease liability |
| $ | 354,889 | $ | 603,530 |
On May 3, 2021, the Company entered into a lease agreement for the building on 4740 Cleveland in Ft. Myers, Fl. The money receivedlease has a term of 72 months with monthly payments ranging from $40,833 to $49,583 from May 2021-July 2021 and $58,333 from August 2021 through the saleend of the building was usedterm. The Company determined the lease to purchase Quality Circuit Assembly. Because this isbe an operating lease and recognized a financing transaction, the sale is recorded under "financingright-of-use asset and operating lease obligation"liability of $3,689,634 based on the Balance Sheet and amortized over the 15-year termpresent value of the lease.
At September 30, 2032 at a monthly rate2021 and December 31, 2020, the weighted average remaining lease terms were 2.88 and 2.98 years; respectively, and the weighted average discount rates were 15% and 15%, respectively.
Note 4 – Notes Payable and Line of approximately $69,000. These payments are reflected inCredit
The outstanding balances for the table above.
| September 30, |
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| December 31, | |
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| 2021 |
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| 2020 |
Lines of credit, current portion | $ | 3,718,972 |
| $ | 2,819,793 |
Equipment loans, current portion |
| 63,531 |
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| 245,388 |
PPP loans |
| 278,867 |
|
| - |
Term notes, current portion |
| 5,468,843 |
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| 4,035,730 |
Total current |
| 9,530,213 |
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| 7,100,911 |
PPP/EIDL loans |
| 877,083 |
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| 4,340,956 |
Long-term portion of equipment loans and term notes |
| 6,645,379 |
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| 10,860,494 |
Total notes payable and line of Credit | $ | 17,052,675 |
| $ | 22,302,361 |
Future scheduled maturities of September 30, 2017 (Successor), for its location in San Jose, CA (QCA), Phoenix, AZ (Alpine) and Oklahoma City, OK (HWT). Approximate monthly rent obligations are $21,500, $2,800, and $5,000 respectively.
Fiscal Year | San Jose, CA | Phoenix, AZ | Oklahoma City, OK | |||||||||
2017 | $ | 64,596 | $ | 5,600 | $ | 15,000 | ||||||
2018 | 266,134 | - | 60,000 | |||||||||
2019 | 274,118 | - | 35,000 | |||||||||
2020 | 282,342 | - | - | |||||||||
2021 | 290,812 | - | - | |||||||||
Thereafter | - | - | - | |||||||||
Total | 1,178,002 | 5,600 | 110,000 |
Twelve Months Ending September 30, |
|
|
2022 | $ | 9,530,212 |
2023 |
| 933,846 |
2024 |
| 2,183,157 |
2025 |
| 125,699 |
2026 |
| 130,755 |
Thereafter |
| 4,149,006 |
Total | $ | 17,052,675 |
During the nine months ended September 30, 2017,2021, the Company secured a linereceived forgiveness on nine loans under the Paycheck Protection Program (“PPP”) of credit with a third-party lender, Crestmark. The line of credit is collateralized by HWT's outstanding accounts receivable, up to 85% with maximum draws of $2,000,000the Coronavirus Aid, Relief and a variable interest rate.Economic Security (“CARES”) Act. The Company alsorecognized a gain on forgiveness of debt of $4,896,573.
In connection with the Deluxe acquisition in November 2019, the Company issued two subordinated secured promissory notes to the seller. The first note for $1,900,000 bears interest at 4.25% per annum, require monthly payment for the first 35 months of $19,463 with any remaining principal and accrued interest due on the 3 year-anniversary. The second note for $496,343 bore interest at 8.75% matured in January 2020 and was fully settled through a five-year fixed rate (10.14%) term loandebt conversion agreement with Crestmark Equipment Finance which is collateralized by HWT's equipment. Both are guaranteedthe seller. On April 8, 2021, the Company entered into a settlement agreement with the seller wherein the outstanding balance on the first note amounting to $1,883,418 including accrued interest and net other costs was settled in full through a payment of approximately $887,000 and the exchange of 1,617,067 shares of the Company’s Class C common shares held by the Company.
In August 2020, the company alsofiled a lawsuit against Alan Martin regarding his note payable (See Note 11). As of September 30, 2021, the note had a balance of $2,857,500 and accrued interest of $1,091,212 which is reflective in the current liabilities.
During 2021, the Company entered into four fixed rate (30.00%) term notes with maturity datesthree revolving lines of credit totaling $8.3 million and two three and six months for a totalcapital expenditures lines of $80,000,credit totaling $1.0 million. The revolving lines of which $70,000 has been repaidcredit used as of September 30, 2017.
On August 27, 2021 the Company entered into $4.7 million agreement for all notes payable are as follows:
September 30, 2017 (Successor) | Alpine 4 | QCA | HWT | |||||||||
LOC current | $ | - | $ | 1,717,937 | $ | 4,648 | ||||||
Equipment current | - | 154,635 | 1,674,758 | |||||||||
Term notes | 10,000 | - | - | |||||||||
Total Current | $ | 10,000 | $ | 1,872,572 | $ | 1,679,406 | ||||||
Equipment noncurrent | - | - | - | |||||||||
Total Notes | $ | 10,000 | $ | 1,872,572 | $ | 1,679,406 |
Note 65 – Notes Payable, Related Parties
At September 30, 2017, the Company made payments2021, and December 31, 2020, notes payable due to related parties for notes payable of $123,500, and borrowed $405,500 of which $300,000 was associated with the HWT acquisition described in Note 9.
Dec 31, 2016 | Borrowings | Payments | Sep 30, 2017 | |||||||||||||
Note payable; non-interest bearing; due upon demand; unsecured | $ | 15,000 | $ | - | $ | (15,000 | ) | $ | - | |||||||
Note payable; non-interest bearing; due upon demand; unsecured | 15,000 | - | (15,000 | ) | - | |||||||||||
Note payable; interest bearing; due May 31, 2017; unsecured | 5,000 | - | (5,000 | ) | - | |||||||||||
Notes payable; non-interest bearing; due upon demand; unsecured | - | 6,000 | (1,500 | ) | 4,500 | |||||||||||
Note payable; interest bearing; due January 10, 2017; unsecured | 60,000 | - | (60,000 | ) | - | |||||||||||
Note payable; interest bearing; due March 2, 2017; unsecured | - | 10,000 | (10,000 | ) | - | |||||||||||
Note payable; interest bearing; due March 14, 2017; unsecured | - | 12,000 | (12,000 | ) | - | |||||||||||
Note payable; interest bearing; due April 11, 2017; unsecured | - | 2,500 | (2,500 | ) | - | |||||||||||
Note payable; interest bearing; due May 26, 2017; unsecured | - | 43,500 | - | 43,500 | ||||||||||||
Note payable; interest bearing; due June 30, 2017; unsecured | 10,000 | - | (2,500 | ) | 7,500 | |||||||||||
Note payable; interest bearing; due May 31, 2017; secured | 100,000 | - | - | 100,000 | ||||||||||||
- | 300,000 | - | 300,000 | |||||||||||||
Note payable; interest bearing; due March 3, 2018; unsecured | - | 11,500 | - | 11,500 | ||||||||||||
Note payable; interest bearing; due April 27, 2018; unsecured | - | 20,000 | - | 20,000 | ||||||||||||
$ | 205,000 | $ | 405,500 | $ | (123,500 | ) | $ | 487,000 |
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| September 30, |
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| December 31, |
| 2021 |
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| 2020 | |
Notes payable; non-interest bearing; due upon demand; unsecured | $ | 3,000 |
| $ | 3,000 |
Series of notes payable, bearing interest at rates from 0% to 20% per annum, with maturity dates from April 2018 to July 2021, unsecured |
| - |
|
| 235,651 |
Total notes payable - related parties | $ | 3,000 |
| $ | 238,651 |
Two non-interest-bearing notes totaling $3,000 were in default as of September 30, 2017, a note with a related party was amended with a2021. These notes were due on demand by the lenders as of the date of January 30, 2017, to May 31, 2017. Also, a note with due date of April 30, 2017, was amended to July 31, 2017. These notes are now due upon demand.
Note 76 – Convertible Notes Payable
At September 30, 2021, and December 31, 2020, convertible notes payable consisted of the following:
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| September 30, |
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| December 31, |
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| 2021 |
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| 2020 | |
Series of convertible notes payable issued prior to December 31, 2016, bearing interest at rates of 8% - 10% per annum, with due dates ranging from December 2016 through June 2017. The outstanding principal and interest balances are convertible into shares of Class A common stock at the option of the debt holder at exercise price of $1 per share. |
| $ | 7,500 |
| $ | 25,000 |
Secured convertible notes payable issued to the sellers of QCA on April 1, 2016 for an aggregate of $2,000,000, bearing interest at 5% per annum, due in monthly payments starting on July 1, 2016 and due in full on July 1, 2019. On August 6 and 11, 2019, the Company extended the due date of the two notes to December 31, 2020 and December 31, 2022, respectively. In May and June 2020, these convertible notes were amended — see (A) below. The outstanding principal and interest balances were fully paid during the nine months ended September 30, 2021. |
|
| - |
|
| 1,291,463 |
On December 7, 2018, the Company entered into a variable convertible note for $130,000 with net proceeds of $122,200. The note is due September 7, 2019 and bears interest at 12% per annum. The note is immediately convertible into shares of the Company's Class A common stock at a discount of 40% to the lowest trading closing prices of the stock for 20 days prior to conversion. This note was amended in November 2019 to increase the principal amount by $180,000 due to penalty interest; increase the interest rate to 15% and effect a floor in the conversion price of $0.15 per share. The outstanding principal and interest balance of the note was converted during the nine months ended September 30, 2021. |
|
| - |
|
| 7,538 |
On November 14, 2019, the Company issued a convertible note for $200,000. The note is due November 13, 2020 and bears interest at 15% per annum. The note is immediately convertible into shares of the Company's Class A common stock at a fixed price of $0.15 per share. The outstanding principal balance of the note was converted during the nine months ended September 30, 2021. |
|
| - |
|
| 200,000 |
In December 2020 and January 2021, the Company issued convertible notes to individual investors totaling to $1,890,500. The notes are due three to six months from the date of issuance; accrue interest at 5 – 6.25% per annum and are convertible into shares of the Company's Class A common stock at a fixed rate of $0.25 to $3.00. The outstanding principal balance of the notes were converted during the nine months ended September 30, 2021. |
|
| - |
|
| 1,482,500 |
Total convertible notes payable |
|
| 7,500 |
|
| 3,006,501 |
Less: discount on convertible notes payable |
|
| - |
|
| (1,343,624) |
Total convertible notes payable, net of discount |
|
| 7,500 |
|
| 1,662,877 |
Less: current portion of convertible notes payable |
|
| (7,500) |
|
| (562,242) |
Long-term portion of convertible notes payable |
| $ | - |
| $ | 1,100,635 |
In May and June 2020 the Company amended the following seller notes:
-The convertible note with Jeff Moss with a $720,185 balance as of May 4, 2020, was amended to extend the maturity date to May 4, 2027, at 5% interest with weekly payments of $2,605. The principal balance was increased to $798,800 and the balance outstanding at December 31, 2020, was $735,329.
-The convertible note with Dwight Hargreaves with a $551,001 balance as of June 5, 2020, was amended to extend the maturity date to June 5, 2026, at 6% interest with weekly payments of $2,316. The principal balance was increased to $605,464 and the balance outstanding at September 30, 2021 and December 31, 2020, was $0 and $556,135, respectively.
A loss on extinguishment of debt of $192,272 was recognized on these transactions in June 2020.
During the nine months ended September 30, 2017 (Successor),2021, and the year ended December 31, 2020, the Company entered into fixed convertible note agreements with investors and as consideration for an acquisition. The fixedissued convertible notes are unsecured; bear interest at 5-20% annually, and are due from April 27, 2016, to July 1, 2019. All thewith fixed convertible notes payable contain a provision that allows the note holder to convert the outstanding balance into shares of the Company's Class A common stock. Notes are convertible at $1.00 per share, except for those issued for the HWT and QCA business acquisitions, which are convertible at $8.50 and $10.00 per share.conversion prices. The debt discount, which arises fromCompany recognized a beneficial conversion feature ("BCF") onrelated to these convertible notes amounting to $92,428 and $1,482,500 for the $1 per share investornine months ended September 30, 2021, and the year ended December 31, 2020, respectively, as a debt discount to the convertible notes isand as a component of equity. The discounts are being amortized over the terms of the convertible notes payable. Total BCF discount recognized is $30,000 forAmortization of debt discounts during the nine months ended September 30, 2017. For the nine months ended September 30, 2017 (Successor), the Company recognized2021 and 2020, amounted to $1,436,052 and $507,534, respectively, and is recorded as interest expense in the accompanying consolidated statements of $28,406 related to the amortization of the debt discount. Theoperations. There was no remaining unamortized discount balance for these notes was $9,015 as of September 30, 2017.
A common stock at $1 per share.
Sep 30, 2017 | Dec 31, 2016 | |||||||
Convertible Note - current | $ | 2,118,830 | $ | 254,780 | ||||
Debt discount | (76,098 | ) | (7,421 | ) | ||||
Net current | $ | 2,042,732 | $ | 247,359 | ||||
Convertible Note - noncurrent | 1,694,627 | 1,760,198 | ||||||
Total Convertible Note | $ | 3,737,359 | $ | 2,007,557 |
Payments due by Period | ||||||||||||||||||||
Less than One Year | One to Three Years | Three to Five Years | More Than Five Years | Total | ||||||||||||||||
Notes payable, related parties | $ | 487,00 | $ | - | $ | - | $ | - | $ | 487,000 | ||||||||||
Notes payable, non-related parties | 3,561,978 | - | - | - | 3,561,978 | |||||||||||||||
Convertible notes payable | 2,118,830 | 1,694,627 | 3,813,457 | |||||||||||||||||
Total | $ | 6,167,808 | $ | 1,694,627 | $ | - | $ | - | $ | 7,862,435 |
Balance outstanding, December 31, 2020 | $ | 1,662,877 | ||
Issuance of convertible notes payable for cash |
| 408,000 | ||
Repayment of notes |
|
|
| (1,680,964) |
Conversion of notes payable to common stock |
| (1,726,037) | ||
Amortization of debt discounts |
|
| 1,436,052 | |
Discount from beneficial conversion feature |
| (92,428) | ||
Balance outstanding, September 30, 2021 |
| $ | 7,500 |
Note 87 – Stockholders' Equity
Common Stock
The Company had the following transactions in its common stock during the nine months ended September 30, 2017:
·On February 11, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain investors to purchase 8,333,333 shares | |
·In February 2021, the Company issued 1,524,064 shares of Class A common stock to an investor for cash for total proceeds of $9.3 million.
·During the nine months ended September 30, 2017,2021, the following stock options wereCompany issued to purchase one share each7,384,018 shares of the Company's Class A common stock. The options were issued pursuant tostock for the Company's 2016 Stock Optionconversion of total debt and Stock Award Plan (the "Plan"). Theaccrued liabilities totaling $1,886,898.
·On March 17, 2021, the Company uses the Black-Scholes option pricing model to estimate the fair valuerepurchased 45,000 shares of stock-based awards on the date of grant and on each modification date using the following assumptions.
·On April 7, 2017,May 5, 2021, the Company issued 741,500 options to employees and consultants281,223 shares of the Company. The options granted vest over the next four years, and the exercise price of the options granted is $0.90, which was the last closing bid price of the Company'sClass A common stock as traded on the OTC QB Market. The stock options arethat were valued at $586,972 which will be expensed quarterly over$1,102,394 in connection with the vesting period.
·On May 3, 2017,10, 2021, the Company issued 114,000 options to an employee. The options granted vest over the next four years and the exercise price361,787 shares of the options granted is $0.26, which was the last closing bid price of the Company'sClass A common stock as traded on the OTC QB Market. The stock options arethat were valued at $29,298 which will be expensed quarterly over$1,432,677 in connection with the vesting period.
·On July 31, 2017,April 30, 2021, the Company issued 488,500 options to employees and consultants1,617,067 shares of Class A common stock for no additional consideration upon conversion of that number of shares of Class C common stock by the holder of the Company. The options granted vest overClass C common stock.
·On May 17, 2021, the next four years, andCompany issued 350,000 shares of Class A common stock for no additional consideration upon conversion of that number of shares of Class B common stock by the exercise priceholder of the options granted is $0.13, which wasClass B common stock.
Preferred Stock
·On February 8, 2021, the last closing bid priceCompany issued 1,432,244 shares of Series D Preferred Stock in connection with the Company's common stock as traded on the OTC QB Market. The stock options areacquisition of assets of Vayu that were valued at $62,773$6,653,309.
·In March 2021, the Company repurchased 514,286 outstanding restricted stock units (RSUs) which will be expensed quarterly overhad not yet settled, from two individuals in privately negotiated transactions. The Company repurchased 314,286 shares of Series C Preferred Stock and 200,000 shares of Series D Preferred Stock at $3.50 per share. The RSUs had been issued to the vesting period.
Stock Options
The following summarizes the threestock option activity for the nine months ended September 30, 2017, approximately $37,0002021:
|
|
|
|
|
| Weighted- |
|
|
|
|
|
|
| Weighted- |
| Average |
|
|
|
|
|
|
| Average |
| Remaining |
|
| Aggregate |
|
|
|
| Exercise |
| Contractual |
|
| Intrinsic |
| Options |
|
| Price |
| Life (Years) |
|
| Value |
Outstanding at December 31, 2020 | 1,790,000 |
| $ | 0.19 |
| 7.09 |
| $ | 6,176,855 |
Granted | - |
|
|
|
|
|
|
| |
Forfeited | - |
|
|
|
|
|
|
| |
Exercised | - |
|
|
|
|
|
|
|
|
Outstanding at September 30, 2021 | 1,790,000 |
| $ | 0.19 |
| 6.34 |
| $ | 3,599,255 |
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest |
|
|
|
|
|
|
|
|
|
at September 30, 2021 | 1,790,000 |
| $ | 0.19 |
| 6.34 |
| $ | 3,599,255 |
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2021 | 1,556,126 |
| $ | 0.21 |
| 6.27 |
| $ | 3,097,221 |
The following table summarizes information about options outstanding and exercisable as of expense was recorded for stock options expense. September 30, 2021:
|
|
| Options Outstanding |
| Options Exercisable | ||||||||
|
|
|
|
| Weighted |
|
| Weighted |
|
|
|
| Weighted |
|
|
|
|
| Average |
|
| Average |
|
|
|
| Average |
| Exercise |
| Number |
| Remaining |
|
| Exercise |
| Number |
|
| Exercise |
| Price |
| of Shares |
| Life (Years) |
|
| Price |
| of Shares |
|
| Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 0.05 |
| 979,000 |
| 6.88 |
|
| 0.05 |
| 761,063 |
|
| 0.05 |
| 0.10 |
| 85,000 |
| 6.53 |
|
| 0.10 |
| 69,063 |
|
| 0.10 |
| 0.13 |
| 388,500 |
| 5.84 |
|
| 0.13 |
| 388,500 |
|
| 0.13 |
| 0.26 |
| 114,000 |
| 5.59 |
|
| 0.26 |
| 114,000 |
|
| 0.26 |
| 0.90 |
| 223,500 |
| 5.52 |
|
| 0.90 |
| 223,500 |
|
| 0.90 |
|
|
| 1,790,000 |
|
|
|
|
|
| 1,556,126 |
|
|
|
During the nine months ended September 30, 2017, approximately $69,000 of2021 and 2020, stock option expense was recorded foramounted to $31,933 and $58,887, respectively. Unrecognized stock options expense.
Warrants
The Company will reassessfollowing summarizes the likelihood of such at each period end.
|
|
|
|
|
| Weighted- |
|
|
|
|
|
|
| Weighted- |
| Average |
|
|
|
|
|
|
| Average |
| Remaining |
|
| Aggregate |
|
|
|
| Exercise |
| Contractual |
|
| Intrinsic |
| Warrants |
|
| Price |
| Life (Years) |
|
| Value |
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2020 | 275,000 |
| $ | 1.01 |
| 0.23 |
| $ | 723,250 |
Granted | 416,667 |
|
| 6.60 |
|
|
|
|
|
Forfeited | (275,000) |
|
| 1.01 |
|
|
|
|
|
Exercised | - |
|
|
|
|
|
|
|
|
Outstanding at September 30, 2021 | 416,667 |
| $ | 6.60 |
| 3.39 |
| $ | - |
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest |
|
|
|
|
|
|
|
|
|
at September 30, 2021 | 416,667 |
| $ | 6.60 |
| 3.39 |
| $ | - |
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2021 | - |
| $ | - |
| - |
| $ | - |
The following table summarizes information about warrants outstanding and exercisable as of September 30, 2021:
|
|
| Warrants Outstanding |
| Warrants Exercisable | ||||||||
|
|
|
|
| Weighted |
|
| Weighted |
|
|
|
| Weighted |
|
|
|
|
| Average |
|
| Average |
|
|
|
| Average |
| Exercise |
| Number |
| Remaining |
|
| Exercise |
| Number |
|
| Exercise |
| Price |
| of Shares |
| Life (Years) |
|
| Price |
| of Shares |
|
| Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ | 6.60 |
| 416,667 |
| 3.39 |
| $ | 6.60 |
| - |
| $ | - |
|
|
| 416,667 |
|
|
|
|
|
| - |
|
|
|
During the nine months ended September 30, 2021, the Company issued 416,667 warrants to a placement agent in connection with sale of its common stock. The warrants have an exercise price of $6.60, are exercisable as of August 16, 2021 and expire on February 16, 2025.
The fair value of the 416,667 warrants, issued to the placement agent during the nine months ended September 30, 2021, of $2,498,637 was determined using the Black-Scholes option pricing model with the following assumptions:
Stock price | $6.00 | |
Risk-free interest rate | 0.01% | |
Expected life of the options | 4 years | |
Expected volatility | 347% | |
Expected dividend yield | 0% |
The fair value of the warrants was recorded as offering costs with a corresponding credit to additional paid in capital.
Vayu (US)
Effective April 1, 2016February 8, 2021, the Company Purchased 100%purchased the assets of Vayu (US), Inc., a Delaware corporation (“Vayu”).
Under the provision of ASC 805, the Company had to determine whether this acquisition was a business combination or an asset (or a group of assets) acquisition. In doing so, the Company determined that the acquisition of Vayu was in fact an asset purchase. Of the consideration given for the Vayu acquisition more than 95% was concentrated in a single asset or a group of assets in Intellectual Property. As such, the Company accounted for this acquisition as an asset acquisition in accordance with ASC 805-10-20. Accordingly, the assets acquired are initially recognized at the consideration paid, which was the fair value of the series D preferred stock issued, including direct acquisition costs, of Quality Circuit Assembly, Inc., a California corporation ("QCA").
|
| Purchase Allocation |
Cash | $ | 81,442 |
Property and equipment |
| 50,000 |
Intellectual property |
| 6,981,256 |
Non-solicitation covenant |
| 90,000 |
Accrued expenses and other current liabilities | (411,539) | |
SBA loan (PPP funds) |
| (137,850) |
| $ | 6,653,309 |
The purchase price was paid byas follows:
Series D Preferred Stock | $ | 6,653,309 |
| $ | 6,653,309 |
TDI
On May 5, 2021, the Company forclosed on the QCA Shares consistedacquisition of cash andThermal Dynamics, Inc., a convertible promissory note. The "Cash Consideration" paidDelaware corporation. This acquisition was the aggregate amount of $3,000,000. The "Promissory Note Consideration" consistsconsidered an acquisition of a secured promissory note (the "Quality Circuit Assembly Note") in the amount of $2,000,000 ($165,330 current, $1,694,627 noncurrent), secured by a subordinated security interest in the assets of QCA. Additionally, the Sellers have the opportunity to convert the Quality Circuit Assembly Note into shares of the Company's Class A common stock at a conversion price of $10 per share after 12 months. The Quality Circuit Assembly Note will bear interest at 5% with first payment due July 1, 2016, and will be payable in full in 36-months (namely, July 1, 2019).
Purchase Allocation | ||||
Cash | $ | 200,000 | ||
Accounts Receivable | 1,158,995 | |||
Inventory | 950,424 | |||
Property, Plant & Equipment | 1,256,885 | |||
Prepaid | 6,035 | |||
Intangibles | 631,187 | |||
Goodwill | 1,963,761 | |||
Accounts Payable | (672,410 | ) | ||
Accrued Expenses | (128,444 | ) | ||
Income Tax Payable | (20,123 | ) | ||
Deferred Tax Liability | (346,310 | ) | ||
$ | 5,000,000 |
|
| Purchase Allocation |
Accounts receivable | $ | 1,408,682 |
Contract assets |
| 826,231 |
Property and equipment |
| 111,789 |
Intangible assets |
| 4,820,000 |
Goodwill |
| 3,528,621 |
Accounts payable |
| (786,151) |
Accrued expenses and other current liabilities |
| (53,857) |
Contract liability | (2,334,188) | |
Notes payable |
| (64,733) |
| $ | 7,456,394 |
The purchase price was paid as follows:
Class A Common Stock | $ | 1,102,394 |
Cash |
| 6,354,000 |
| $ | 7,456,394 |
Alt Labs
On May 10, 2021, the Company Purchased 100%closed on the acquisition of the stock of Horizon Well Testing, LLC, an OklahomaAlternative Laboratories, LLC., a Delaware limited liability company ("HWT").
Purchase Allocation | ||||
Cash | $ | 262,384 | ||
Accounts Receivable, net | 245,833 | |||
Property, Plant & Equipment | 4,804,458 | |||
Intangibles | - | |||
Goodwill | 167,845 | |||
Accrued Expenses | (25,086 | ) | ||
Total consideration | $ | 5,455,434 |
|
| Purchase Allocation |
Accounts receivable | $ | 397,441 |
Inventory |
| 2,621,653 |
Property and equipment |
| 1,739,441 |
Intangible assets |
| 10,410,000 |
Goodwill |
| 252,851 |
Other asset |
| 390,502 |
Accounts payable |
| (397,441) |
Accrued expenses and other current liabilities | (62,242) | |
Contract liability | (1,754,290) | |
Noted payable |
| (1,695,238) |
| $ | 11,902,677 |
The purchase price was paid as follows:
Class A Common Stock | $ | 1,432,677 |
Cash |
| 10,470,000 |
| $ | 11,902,677 |
On May 4, 2021, the Company also entered into an adjustment was madeagreement to acquire the 100% membership interest in 4740 Cleveland LLC (“Cleveland”), a Florida limited liability company that is the owner of the building currently being leased by Alt Labs, for a total purchase price of $7,000,000. In connection with this agreement, the Company placed in escrow the amount of $1,400,000 which will be applied to the purchase price allocation basedupon closing. The Company closed on additional information. Intangibles decreased by $123,240, Property, Plant & Equipment increased by $273,459 and Goodwill decreased by $150,219.the purchase of the building in August 2021.
The following are the unaudited pro forma results of operations for the nine months ended September 30, 2016 (Predecessor),2021 and 2020, as if the Companies (Alpine, QCA & HWT)Excel, Impossible Aerospace, Inc. (“IA”), Vayu, TDI, and Alt Labs had been combined as ofacquired on January 1, 2016, follow.2020. The pro forma results include estimates and assumptions which management believes are reasonable. However, pro forma results do not include any anticipated cost savings or other effects of the planned integration of these entities, and are not necessarily indicative of the results that would have occurred if the business combination had been in effect on the dates indicated or which may resultindicated.
|
| Pro Forma Combined Financials (unaudited) | |||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, | ||||
| 2021 |
| 2020 |
|
| 2021 |
| 2020 | |
Sales | $ | 17,398,316 | $ | 16,299,024 |
| $ | 49,465,682 | $ | 51,377,078 |
Cost of goods sold |
| 12,104,134 |
| 12,020,468 |
|
| 35,183,907 |
| 37,090,187 |
Gross profit |
| 5,294,182 |
| 4,278,556 |
|
| 14,281,775 |
| 14,286,891 |
Operating expenses |
| 6,966,642 |
| 4,855,978 |
|
| 21,474,825 |
| 17,294,094 |
Loss from operations |
| (1,672,460) |
| (577,422) |
|
| (7,193,050) |
| (3,007,203) |
Net income (loss) | 2,481,592 |
| (809,618) |
|
| (3,892,897) |
| (2,742,963) | |
Net income (loss) per share |
| 0.01 |
| (0.01) |
|
| (0.02) |
| (0.02) |
Note 9 – Equity Investments
AmplifeiIntl LLC
On September 15, 2021, A4 Manufacturing, Inc. entered into a Membership Interest Purchase Agreement acquiring approximately a 9% membership interest in AmplifeiIntl LLC (also doing business as Happinss), a Texas limited liability company. The membership interest is non-voting and the future. For period endingCompany does not have the ability to exercise significant influence over operating and financial activities. The equity investment is being valued using cost as there is no market for the membership units, and accordingly, no quoted market price is available. The investment is tested for impairment, at least annually, and more frequently upon the occurrences of certain events. As of September 30, 2017 (Successor), pro forma information is not provided because2021, the results after December 31, 2016, are post-acquisition.
Pro Forma Combined Financials | ||||
Nine Months Ended September 30, 2016 | ||||
Revenue | $ | 9,017,550 | ||
Net (Loss) Income | $ | (2,827,653 | ) | |
Net (Loss) Income per Common Share - Basic and Diluted | $ | (0.12 | ) |
The membership interest was paid for as follows:
Accounts receivable converted | $ | 1,000,000 |
Cash |
| 350,000 |
Total | $ | 1,350,000 |
Note 10 – Industry Segments
The Company discloses segment information that is consistent with the Company's currentway in which management operates and views its business. Effective during the quarter ended September 30, 2021, the Company has reduced its reportable segments QCAto four operating segments as represented by the Company’s four silos: A4 Construction Services, Inc.; A4 Manufacturing, Inc.; A4 Aerospace Corporation; and HWT,A4 Defense Systems, Inc. The Company’s reportable segments for the three and nine months ended September 30, 2017 (Successor). Prior periods are not presented as QCA made up the majority of the financials.
Successor | ||||||||||||||||
Three Months Ended September 30, 2017 | ||||||||||||||||
QCA | HWT | Unallocated & Eliminations | Total Consolidated | |||||||||||||
Revenue, external customers | $ | 2,084,565 | $ | 74,301 | $ | 62,667 | $ | 2,221,533 | ||||||||
Revenue, company segments | 564 | - | (564 | ) | - | |||||||||||
Segment Gross Profit | 645,360 | 51,706 | 4,243 | 701,309 | ||||||||||||
Segment Depreciation and Amortization | 72,538 | 111,674 | 20,835 | 205,047 | ||||||||||||
Segment Interest expense | 179,491 | 71,404 | 173,091 | 423,986 | ||||||||||||
Segment income tax expense | 8,253 | - | 50 | 8,303 | ||||||||||||
Segment net gain/(loss) | (489,950 | ) | (365,949 | ) | (817,707 | ) | ||||||||||
Purchase and acquisition long-lived assets | 6,480 | 73,042 | 16,344 | 95,866 |
Successor | ||||||||||||||||
Nine Months Ended September 30, 2017 | ||||||||||||||||
QCA | HWT | Unallocated & Eliminations | Total Consolidated | |||||||||||||
Revenue, external customers | $ | 5,648,285 | $ | 1,200,381 | $ | 196,140 | $ | 7,044,806 | ||||||||
Revenue, company segments | 27,401 | - | (27,401 | ) | - | |||||||||||
Segment Gross Profit | 1,742,209 | 565,887 | 75,547 | 2,383,643 | ||||||||||||
Segment Depreciation and Amortization | 217,136 | 313,155 | 37,501 | 567,792 | ||||||||||||
Segment Interest expense | 528,144 | 209,395 | 342,937 | 1,080,476 | ||||||||||||
Segment income tax expense | 8,620 | - | 50 | 8,670 | ||||||||||||
Segment net gain/(loss) | (99,724 | ) | (1,279,928 | ) | (878,765 | ) | (2,258,417 | ) | ||||||||
Purchase and acquisition long-lived assets | 75,480 | 4,803,164 | 28,344 | 4,906,988 |
Successor | ||||||||||||||||
As of September 30, 2017 | ||||||||||||||||
QCA | HWT | Unallocated | Total Consolidated | |||||||||||||
Accounts receivable, net | $ | 1,716,616 | $ | 36,312 | $ | 1,909 | $ | 1,754,837 | ||||||||
Goodwill | 1,963,761 | 167,845 | - | 2,131,606 | ||||||||||||
Total assets | 10,772,456 | 4,860,059 | 314,975 | 15,947,490 |
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
| |
| Construction Services | $ | 5,465,881 | $ | 5,488,718 | $ | 15,565,332 | $ | 17,198,134 |
| Manufacturing |
| 10,210,549 |
| 3,240,915 |
| 21,506,262 |
| 9,409,959 |
| Defense |
| 1,721,886 |
| - |
| 2,866,991 |
| - |
| $ | 17,398,316 | $ | 8,729,633 | $ | 39,938,585 | $ | 26,608,093 | |
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
|
| |
| Construction Services | $ | 678,702 | $ | 343,965 | $ | 1,392,904 | $ | 2,753,554 |
| Manufacturing |
| 3,128,290 |
| 995,262 |
| 6,672,549 |
| 2,301,433 |
| Defense |
| 641,144 |
| - |
| 1,101,362 |
| - |
| $ | 4,448,136 | $ | 1,339,227 | $ | 9,166,815 | $ | 5,054,987 | |
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
|
|
|
|
|
| |
| Construction Services | $ | (607,794) | $ | (529,896) | $ | (3,464,327) | $ | (195,470) |
| Manufacturing |
| 947,792 |
| 392,029 |
| 1,679,930 |
| (886,867) |
| Aerospace |
| (963,134) |
| - |
| (3,886,311) |
| - |
| Defense |
| (135,575) |
| - |
| (131,953) |
| - |
| Unallocated |
| (913,749) |
| (434,184) |
| (3,846,085) |
| (2,199,556) |
Fair value measurement on a recurring basis | ||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||
As of September 30, 2017 | ||||||||||||
Liabilities | ||||||||||||
Derivatives | $ | - | $ | - | $ | 175,332 | ||||||
As of December 31, 2016 | ||||||||||||
Liabilities | ||||||||||||
Derivatives | $ | - | $ | - | $ | - |
| $ | (1,672,460) | $ | (572,051) | $ | (9,648,746) | $ | (3,281,893) | |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
| |
| Construction Services | $ | 240,966 | $ | 389,269 | $ | 995,014 | $ | 1,099,834 |
| Manufacturing |
| 469,419 |
| 153,271 |
| 1,049,042 |
| 455,714 |
| Aerospace |
| 222,291 |
| - |
| 448,659 |
| - |
| Defense |
| 87,322 |
| - |
| 143,539 |
| - |
| Unallocated |
| 158,807 |
| 10,520 |
| 215,715 |
| 27,056 |
| $ | 1,178,805 | $ | 553,060 | $ | 2,851,969 | $ | 1,582,604 | |
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
|
|
|
|
|
| |
| Construction Services | $ | 150,028 | $ | 567,206 | $ | 832,498 | $ | 1,723,594 |
| Manufacturing |
| 113,910 |
| 233,283 |
| 382,785 |
| 615,436 |
| Defense |
| - |
| - |
| 825 |
| - |
| Unallocated |
| 273,944 |
| 338,973 |
| 2,010,084 |
| 1,355,501 |
| $ | 537,882 | $ | 1,139,462 | $ | 3,226,192 | $ | 3,694,531 | |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
|
| |
| Construction Services | $ | 1,792,912 | $ | (1,027,073) | $ | (881,293) | $ | (1,240,693) |
| Manufacturing |
| 2,913,757 |
| 400,368 |
| 3,371,416 |
| (1,145,527) |
| Aerospace |
| (963,134) |
| - |
| (3,456,780) |
| - |
| Defense |
| (120,481) |
| - |
| (114,097) |
| - |
| Unallocated |
| (1,141,462) |
| (773,157) |
| (5,694,399) |
| (1,326,168) |
| $ | 2,481,592 | $ | (1,399,862) | $ | (6,775,153) | $ | (3,712,388) |
|
|
|
|
|
| As of September 30, 2021 |
| As of December 31, 2020 | |
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
|
|
|
|
|
|
| |
| Construction Services |
|
|
|
| $ | 16,681,507 | $ | 22,648,181 |
| Manufacturing |
|
|
|
|
| 43,804,926 |
| 10,731,936 |
| Aerospace |
|
|
|
|
| 14,332,809 |
| 6,342,863 |
| Defense |
|
|
|
|
| 11,319,049 |
| - |
| Unallocated |
|
|
|
|
| 10,973,041 |
| 1,011,203 |
|
|
|
|
| $ | 97,111,332 | $ | 40,734,183 | |
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
| |
| Construction Services |
|
|
|
| $ | 121,221 | $ | 121,221 |
| Manufacturing |
|
|
|
|
| 2,216,612 |
| 1,963,761 |
| Defense |
|
|
|
|
| 3,528,621 |
| - |
|
|
|
|
| $ | 5,866,454 | $ | 2,084,982 | |
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
|
|
|
|
|
| |
| Construction Services |
|
|
|
| $ | 4,793,691 | $ | 4,501,401 |
| Manufacturing |
|
|
|
|
| 7,205,449 |
| 1,983,468 |
| Defense |
|
|
|
|
| 991,089 |
| - |
|
|
|
|
| $ | 12,990,229 | $ | 6,484,869 |
Note 11 – Commitments and Contingencies
Legal Proceedings
From time to time, the changeCompany may become involved in lawsuits and other legal proceedings that arise in the fair valuecourse of business. Litigation is subject to inherent uncertainties, and it is not possible to predict the outcome of litigation with total confidence. As of the derivative liabilities duringdate of this Report, the nine months ended September 30, 2017:
Fair value as of December 31, 2016 | $ | - | ||
Additions recognized as debt discounts | 115,000 | |||
Additions reclassified from equity | 132,693 | |||
Gain on change in fair value of derivatives | (72,361 | ) | ||
Fair value as of September 30, 2017 | $ | 175,332 |
In June 2020, the Company’s subsidiary Excel Fabrication, LLC filed a lawsuit against Fusion Mechanical, LLC, in the Fifth Judicial District Court, State of Idaho (Case Number CV42-20-2246). The Company claimed tortious interference and trade secret violations by the defendant. The defendant filed a motion to dismiss, which was denied by the Court. The defendant filed a second motion to dismiss and the Company filed a memorandum in response to the second motion to dismiss, for which a hearing was held on May 10, 2021. On June 11, 2021, the court issued a decision narrowing the claims of the plaintiffs to three items, breach of contract, good faith and fair dealings, and intentional interference for economic advantage. These were the Company’s three main points of contention. As of the date of this Report, discovery was proceeding. The Company intends to pursue vigorously its claims.
In August 2020, the Company filed a lawsuit, in the United States District Court, District of Arizona (Case No.2:20-cv-01679-DJH), against Alan Martin, the seller of Horizon Well Testing LLC (“HWT”) dba Venture West Energy Services, LLC. The Company brought claims for breach of contract, including but not limited to breaches of the seller’s representations and warranties in the purchase agreement in connection with the acquisition of HWT. The defendant answered and counterclaimed, claiming breach by the Company of its obligation to issue a promissory note (to be issued in connection with the acquisition of HWT). The parties have engaged in discovery and settlement negotiations, both of which were ongoing as of the date of this Report. Additionally, a settlement conference is scheduled for November 18, 2021.
In May 2021, the Company and several shareholders filed a lawsuit, in the United States District Court for the District of Arizona (Case number 2:21-cv-00886-MTL) against Fin Capital LLC ("Fin Cap"), and Grizzly Research LLC ("Grizzly") alleging securities fraud, tortious interference with business expectancy and libel and slander for disseminating false and misleading statements about Alpine 4 and its employees to manipulate the stock price and further their own financial interests.
Note 12 – Subsequent Events
On October 5, 2017,November 1, 2021, the Company entered into a convertible note with an unrelated lender for $60,000 with net proceedsissued 2,506,249 shares of $55,000. The note is due July 4, 2018 and bears interest at 12% per annum. After 180 days, the note is convertible to the Company's Class A common stock at a discountfor no additional consideration upon conversion of 35%1,652,591 shares of Series C Preferred Stock and 1,432,244 shares of Series D Preferred Stock into Class A Common Stock, pursuant to the averagerespective Certificates of Designation of the three lowest trading closing pricesSeries C and Series D Preferred Stock.
Identified Technologies Corporation
On October 20, 2021, the Company and the Company’s subsidiary, A4 Aerospace, Inc., a Delaware corporation (the “Buyer”), entered into a Stock Purchase Agreement (the “SPA”) with Identified Technologies Corporation, a Delaware corporation with foreign registration in Pennsylvania (the “Target”), and all of the stock for ten days priorshareholders of the Target: Birchmere Ventures 5 LP; Xalisco Ventures; Richard Zhang; Ashok Trivedi; Sunil Wadhwani; Innovation Works, Inc.; Startbot LLC; 2008 Mark Zappala IRR Trust; Birchmere Labs I LP; Cimax Partners I; Wu-Yang Family Trust; Zappala Family LP; and AT Gekko PR (each a “Shareholder” and collectively, the “Shareholders”).
Pursuant to conversion. The Company can prepay the convertible note up to 180 days from October 5, 2017. The prepayment penalty is equal to 20% to 25%SPA, the Buyer purchased all of the outstanding note amount depending on when prepaid.
A total of $107,000. The note is due May 2, 2018 and bears interest at 10% per annum. After 180 days, the note is convertible to the Company's888,881 shares of restricted Class A common stock atwith a discountfair value of 35%approximately $3.6 million were issued to the average13 Shareholders, together with an aggregate of $35.47 in cash (to avoid the three lowest trading closing pricesissuance of fractional shares). Pursuant to the stock for ten days priorSPA, the Shareholders were limited to conversion. The Company can prepay the convertible note upbeing able to 180 days from November 2, 2017 with a prepayment penaltysell 33% of $750.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on our financial condition, results of operations, and liquidity. This discussion and analysis should be read in conjunction with the unaudited Financial Statements and notes thereto for the nine months ended September 30, 2021, included under Item 1 – Financial Statements in this Quarterly Report that are not historical facts. These "forward-looking statements" can be identified by use of terminology such as "believe," "hope," "may," "anticipate," "should," "intend," "plan," "will," "expect," "estimate," "project," "positioned," "strategy" and similar expressions. You should be aware that theseour audited Financial Statements and notes thereto for the year ended December 31, 2020 contained in our Annual Report on Form 10-K. The following discussion contains forward-looking statements are subject tothat involve risks and uncertainties, that are beyondsuch as statements of our control. For a discussion of these risks, you should read this entire Report carefully, especially the risks discussed under "Risk Factors." Although management believes that the assumptions underlying the forward-looking statements included in this Report are reasonable, they do not guarantee our future performance,plans, objectives, expectations, and intentions. Our actual results could differ materially from those contemplated by these forward looking statements. The assumptions used for purposes ofdiscussed in the forward-looking statements specified instatements. Please also see the following information represent estimatescautionary language at the beginning of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of thosethis Quarterly Report regarding forward-looking statements. In the light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking statements contained in this Report will in fact transpire. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We expressly disclaim any obligation to update or revise any forward-looking statements.
Overview and Highlights
Company Background
Alpine 4 Technologies Ltd. (the "Company"Holdings, Inc. (“we,” “our,” or the “Company”), was incorporated under the laws of the State of Delaware on April 22, 2014. The Company was formed to serve as a vehicle to affect an asset acquisition, merger, exchange of capital stock, or other business combination with a domestic or foreign business. As of the date of this Report, the Company is a technology holding company owning three companies (ALTIA, LLC; Quality Circuit Assembly, Inc.; and Horizon Well Testing, LLC).
As of the date of this Report, the Company was a holding company that owned eleven operating subsidiaries:
-A4 Corporate Services, LLC;
-ALTIA, LLC;
-Quality Circuit Assembly, Inc.;
-Morris Sheet Metal, Corp;
-JTD Spiral, Inc.;
-Excel Construction Services, LLC;
-SPECTRUMebos, Inc.;
- Vayu (US), Inc.;
-Thermal Dynamics, Inc.;
-Alternative Laboratories, LLC.; and
-Identified Technologies Corporation.
In the first quarter of 2020, we created three additional subsidiaries to act as silo holding companies, organized by industries. These silo subsidiaries are A4 Construction Services, Inc. (“A4 Construction”), A4 Manufacturing, Inc. (“A4 Manufacturing”), and A4 Technologies, Inc. (“A4 Technologies”). In the first quarter of 2021, we formed additional silo subsidiaries: A4 Defense Systems, Inc. (“A4 Defense”); and A4 Aerospace Corporation, Inc. (“A4 Aerospace”). All of these are Delaware corporations. Each is authorized to issue 1,500 shares of common stock with a par value of $0.01 per share, and operational excellence withinthe Company is the sole shareholder of each of these subsidiaries.
In March 2021, the Company announced the combination of its subsidiaries Deluxe Sheet Metal, Inc. (Deluxe) and Morris Sheet Metal Corporation (Morris) to become one of the largest sheet metal contractors in the Midwest region of the United States. Both companies will be under the Morris Sheet Metal brand. The Company’s management believes that the combination of these businesses will create a unique long-term perspective.
On May 5, 2021, the Company acquired all of the outstanding shares of stock of Thermal Dynamics, Inc., a Delaware corporation (“Thermal Dynamics”).
On May 10, 2021, the Company acquired all of the outstanding membership interests of KAI Enterprises, LLC, a Florida limited liability company, the sole asset of which was all of the outstanding membership interests of Alternative Laboratories, LLC, a Delaware limited liability company (“Alt Labs”).
In June 2021, the Company announced the combination of its subsidiaries Impossible Aerospace (“IA”) and Vayu (US) (“Vayu US”) to become Vayu Aerospace Corporation (“VAYU”). The Company’s management believes that the combination of these businesses will create a more harmonious relationship between the two companies. The combining of resources should empower VAYU to strengthen its brand through its strategic banking relationship, eliminate duplicative and competitive interests, and expand its footprint beyond the Michigan home base.
On October 20, 2021, the most to benefit from this access.
Alpine 4 feels this opportunity existsmaintains its corporate office at 2525 E. Arizona Biltmore Circle, Suite C237, Phoenix, Arizona 85016. ALTIA works out of the corporate office. QCA rents a location at 1709 Junction Court #380 San Jose, California 95112. Deluxe Sheet Metal’s facilities are located at 6661 Lonewolf Dr, South Bend, Indiana 46628. Morris Sheet Metal and JTD Spiral are located at 6212 Highview Dr, Fort Wayne, Indiana 46818. Excel Construction Services’ office and fabrication space are located at 297 Wycoff Cir, Twin Falls, Idaho 83301. Impossible Aerospace’s headquarters are located at 2222 Ronald St, Santa Clara, California 95050. Vayu (US) has its headquarters at 3815 Plaza Drive, Ann Arbor, MI 48108. The headquarters for TDI are located at 14955 Technology Ct, Fort Myers, FL 33912. Alt Labs has its headquarters at 4070 S. Cleveland Ave. Fort Myers, FL 33907. The Identified Technologies Corporation headquarters are located at 6401 Penn Ave, Suite 211, Pittsburgh, PA 15206.
Business Strategy
What We Do:
Alexander Hamilton in smaller middle market operating companies with revenues between $5his “Federalist paper #11”, said that our adventurous spirit distinguishes the commercial character of America. Hamilton knew that our freedom to $150 million. In this target rich environment,be creative gave American businesses generally sell at more reasonable multiples, presenting greater opportunities for operational and strategic improvements and have greater potential for growth. Implementationa competitive advantage over the rest of our strategy within our holdings is accomplished by the offering of strategic and tactical MBA-level training and development, delivered via the following modules:
It is our goalmandate to help drivegrow Alpine 4 into a leading, multi-faceted holding company with diverse subsidiary holdings with products and services that not only benefit from one another as a whole, but also have the benefit of independence. This type of corporate structure is about having our subsidiaries prosper through strong onsite leadership while working synergistically with other Alpine 4 holdings. The essence of our business model is based around acquiring B2B companies in a broad spectrum of industries via our acquisition strategy of DSF (Drivers, Stabilizer, Facilitator). Our DSF business model (which is discussed more below) offers our shareholders an opportunity to own small-cap businesses that hold defensible positions in their individual market space. Further, Alpine 4’s greatest opportunity for growth exists in the smaller to middle-market operating companies with revenues between $5 to $150 million annually. In this target-rich environment, businesses generally sell at more reasonable multiples, presenting greater opportunities for operational and strategic improvements that have greater potential to enhance profit.
Driver, Stabilizer, Facilitator (DSF)
Driver: A Driver is a company that is in an emerging market or technology, that has enormous upside potential for revenue and profits, with a significant market opportunity to access. These types of acquisitions are typically small, brand new companies that need a structure to support their growth.
Stabilizer: Stabilizers are companies that have sticky customers, consistent revenue and provide solid net profit returns to Alpine 4.
Facilitators: Facilitators are our “secret sauce”. Facilitators are companies that provide a product or service that an Alpine 4 has been set upsister company can use as leverage to create a competitive advantage.
When you blend these categories into a longer-term view of the business landscape, you can then begin to see the value-driving force that makes this a truly purposeful and powerful business model. As stated earlier, our greatest competitive advantage is our highly diversified business structure combined with a holding company model, with Presidents who will run eachcollaborative business culture, that helps drive out competition in our markets by bringing; resources, planning, technology and Managers with specific industry related experience who, along with Kent Wilson, the CEO of Alpine 4, will help guide our portfolio of companies as needed. Alpine 4 will work with our Presidents and Managers to ensurecapacity that our mottocompetitors simply do not have. DSF reshapes the environment each subsidiary operates in by sharing and exploiting the resources each company has, thus giving them a competitive advantage that their peers do not have.
How We Do It:
Optimization vs. Asset Producing
The process to purchase a perspective company can be long and arduous. During our due diligence period, we are validating and determining three major points, not just the historical record of S.I.D.E (Synergistic, Innovation, Drives, Excellence)the company we are buying. Those three major points are what we call the “What is, utilized. Further,What Should Be and What Will Be”.
•“The What Is” (TWI). TWI is the defining point of where a company is holistically in a myriad of metrics; Sales, Finance, Ease of Operations, Ownership and Customer Relations to name a few. Subsequently, this is usually the point where most acquirers stop in their due diligence. We look to define this position not just from a number’s standpoint, but also how does this perspective map out to a larger picture of culture and business environment.
•“The What Should Be” (TWSB). TWSB is the validation point of inflection where we use many data inputs to assess if TWI is out of the norm with competitors, and does that data show the potential for improvement.
•“The What Will Be” (TWWB). TWWB is how we seek to identify the net results or what we call Kinetic Profit (KP) between the TWI and TWSB. The keywords are Kinetic Profit. KP is the profit waiting to be achieved by some form of action or as we call it, the Optimization Phase of acquiring a new company.
Optimization: During the Optimization Phase, we seek to root up employees with in-depth training on various topics. Usually, these training sessions include; Profit and Expense Control, Production Planning, Breakeven Analysis and Profit Engineering to name a few. But the end game is to guide these companies to: become net profitable with the new debt burden placed on them post-acquisition, mitigate the loss of sales due to acquisition attrition (we typically plan on 10% of our customers leaving simply due to work withold ownership not being involved in the company any longer), potential replacement of employees that No longer wish to be employed post-acquisition and other ancillary issues that may arise. The Optimization Phase usually takes 12-18 months post-acquisition and a company can fall back into Optimization if it is stagnant or regresses in its training.
Asset Producing: Asset Producing is the ideal point where we want our subsidiaries to be. To become Asset Producing, subsidiary management must have completed prescribed training formats, proven they understand the key performance indicators that run their respective departments and capital partners to providefinally, the proper capital allocation and, to work to make sure each business is executing at high levels.
Results of Operations
The following are the beginningresults of our planoperations for diversification take hold withthe three months ended September 30, 2021, as compared to the three months ended September 30, 2020.
|
|
|
|
| Three Months Ended September 30, 2021 |
| Three Months Ended September 30, 2020 |
| $ Change |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
| $ | 17,398,316 | $ | 8,729,633 | $ | 8,668,683 | |
Cost of revenue |
|
|
| 12,950,180 |
| 7,390,406 |
| 5,559,774 | |
Gross Profit |
|
|
| 4,448,136 |
| 1,339,227 |
| 3,108,909 | |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
| ||
| General and administrative expenses |
| 5,539,465 |
| 1,911,278 |
| 3,628,187 | ||
| Research and development |
| 581,131 |
| - |
| 581,131 | ||
| Total operating expenses |
| 6,120,596 |
| 1,911,278 |
| 4,209,318 | ||
Loss from operations |
|
| (1,672,460) |
| (572,051) |
| (1,100,409) | ||
|
|
|
|
|
|
|
|
|
|
Other income (expenses) |
|
|
|
|
|
|
| ||
| Interest expense |
|
| (537,882) |
| (1,139,462) |
| 601,580 | |
| Gain (loss) on extinguishment of debt |
| - |
| 253,063 |
| (253,063) | ||
| Gain on forgiveness of debt |
| 4,307,291 |
| - |
| 4,307,291 | ||
| Bargain purchase gain |
| - |
| 64,371 |
| (64,371) | ||
| Other income |
|
|
| 438,701 |
| (5,783) |
| 444,484 |
| Total other income (expenses) |
|
| 4,208,110 |
| (827,811) |
| 5,035,921 | |
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax |
|
| 2,535,650 |
| (1,399,862) |
| 3,935,512 | ||
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| 54,058 |
| - |
| 54,058 | ||
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
| $ | 2,481,592 | $ | (1,399,862) | $ | 3,881,454 |
Revenue
Our revenues for the three months ended September 30, 2021, increased by $8,668,683 as compared to the three months ended September 30, 2020. In 2021, the increase in revenue is related to the acquisition of Quality Circuit Assembly, Inc. ("QCA") when Alpine 4 acquired 100%TDI and Alt Labs. Revenue also increased due to additional jobs for QCA and Morris after the slowdown from COVID.
Cost of QCA's stock effective April 1, 2016. Additional information relatingrevenue
Our cost of revenue for the three months ended September 30, 2021, increased by $5,559,774 as compared to our acquisitionthe three months ended September 30, 2020. In 2021, the increase in cost of QCA can be found in our Current Report on Form 8-K, filed with the SEC on March 15, 2016.
Operating expenses
Our operating performance and to determine resource allocation between segments.
Other income (expenses)
Other income for anthe three months ended September 30, 2021, increased level of cash flowby $5,035,921 as compared to the Company. Second,same period in 2020. This increase was primarily due to forgiveness of the Company is in negotiations to acquire another company that management believes will increase income and cash flow toPaycheck Protection Program (“PPP”) Loans.
The following are the Company as QCA has done. Third, the Company plans to issue additional sharesresults of common stock for cash and services during the next 12 months and has engaged MCAP, LLC to provide advisory services in connection with that capital raise.
|
|
|
|
| Nine Months Ended September 30, 2021 |
| Nine Months Ended September 30, 2020 |
| $ Change |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
| $ | 39,938,585 | $ | 26,608,093 | $ | 13,330,492 | |
Cost of revenue |
|
|
| 30,771,770 |
| 21,553,106 |
| 9,218,664 | |
Gross Profit |
|
|
| 9,166,815 |
| 5,054,987 |
| 4,111,828 | |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
| ||
| General and administrative expenses |
| 17,719,228 |
| 7,225,280 |
| 10,493,948 | ||
| Impairment loss of intangible assets |
| - |
| 1,111,600 |
| (1,111,600) | ||
| Research and development |
| 1,096,333 |
| - |
| 1,096,333 | ||
| Total operating expenses |
| 18,815,561 |
| 8,336,880 |
| 10,478,681 | ||
Loss from operations |
|
| (9,648,746) |
| (3,281,893) |
| (6,366,853) | ||
|
|
|
|
|
|
|
|
|
|
Other income (expenses) |
|
|
|
|
|
|
| ||
| Interest expense |
|
| (3,226,192) |
| (3,694,531) |
| 468,339 | |
| Change in value of derivative liability |
|
| - |
| 2,298,609 |
| (2,298,609) | |
| Gain on extinguishment of debt |
| 803,079 |
| 344,704 |
| 458,375 | ||
| Change in fair value of contingent consideration |
| - |
| 500,000 |
| (500,000) | ||
| Gain on forgiveness of debt |
| 4,896,573 |
| - |
| 4,896,573 | ||
| Bargain purchase gain |
| - |
| 64,371 |
|
| ||
| Other income |
|
|
| 454,191 |
| 56,352 |
| 397,839 |
| Total other income (expenses) |
|
| 2,927,651 |
| (430,495) |
| 3,358,146 | |
|
|
|
|
|
|
|
|
|
|
Loss before income tax |
|
| (6,721,095) |
| (3,712,388) |
| (3,008,707) | ||
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| 54,058 |
| - |
| 54,058 | ||
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| $ | (6,775,153) | $ | (3,712,388) | $ | (3,062,765) |
During the 6SA product for the period ending June 30, 2016, as well as oil industry services for the period endingnine months ended September 30, 2017. The2021, the Company began selling the 6SA products and services during the second half of 2015, and expect our revenue to grow significantly over the next 12 months. Management's expectations of growth in revenues are based on management's contacts within the automobile dealership industry and the anticipated increase in interest in Alpine 4's products and services. Management also expects revenue from circuit board and wire harness sales to increase over the next 12 months as well as serviceshad several one-time / non-recurring items included in the oil field industry.$6,775,153 net loss. These expectations are a resultnon-recurring items totaled $3,613,435, consisting of increased focus on acquiring$350,000 in new customersacquisitions expenses captured in professional fees, and growing current customer's orders.
Revenue
Our cost of revenues was $4,661,163 for the nine months ended September 30, 2017 (Successor). This compares2021, increased by $13,330,492 as compared to $1,383,031 for the three months ended March 31, 2016 (Predecessor) and $2,730,395 for the sixnine months ended September 30, 2016 (Successor). We expect our2020. In 2021, the increase in revenue is related to the acquisition of TDI and Alt Labs. Revenue also increased due to additional jobs for QCA and Morris after the slowdown from COVID.
Cost of revenue
Our cost of revenue to increase over the next 12 months as our revenue increases.
Operating expenses
Our interest expense was $1,080,476operating expenses for the nine months ended September 30, 2017 (Successor). This compares2021, increased by $10,478,681 as compared to $456 for the three months ended March 31, 2016 (Predecessor) and $627,515 for the sixnine months ended September 30, 2016 (Successor).2020. The increase in interest expense is due to the increaseacquisitions of Vayu US, TDI, and Alt Labs; G&A expenses; and increased spending for infrastructure support at the corporate level of the Company. There were also one-time expenses for the repurchase of RSUs in debt, including convertible notes, along with interest costs associatedconnection with the purchaseacquisitions of QCAImpossible Aerospace and HWT. Interest expense includesVayu of $1,100,451 and $726,932, respectively.
Other income (expenses)
Other income for the interest onnine months ended September 30, 2021, increased by $3,358,146 as compared to the convertible debentures andsame period in 2020. This increase was primarily due to the amortizationforgiveness of the debt discounts associated with the conversion features embedded in the convertible debentures.
Liquidity and Capital Resources
We have financed our operations since inception from existing revenue, the sale of common stock, capital contributions from stockholders and from the issuance of notes payable and convertible notes payable. We expect to continue to finance our operations from our current operating cash flow and by the selling shares of our common stock and by generating income fromor debt instruments. In the first quarter of 2021, we raised approximately $54,000,000 through the sale of our products. As noted above, management's expectationscommon stock.
In April and May 2020, we received seven loans under the Paycheck Protection Program of growth in revenues is based on management's contacts within the automobile dealership industry,U.S. Coronavirus Aid, Relief and Economic Security (“CARES”) Act totaling $3,896,107. During the anticipated increase innine months ended September 30, 2021, the Company also acquired four loans totaling $1,799,725 due to acquisitions. The loans have terms of 24 months and accrue interest in Alpine 4's products and servicesat 1% per annum. We expect some or all of these loans to be forgiven as Alpine 4 increases its advertising and brand and product/service awareness campaigns which beganprovided by in the third quarter of 2017. Additionally, management anticipates thatCARES Act. nine loans totaling $4,896,573 were forgiven during the new campaigns will result in the Company's adding new dealerships each month, which began in the second quarter and which should continue through the end of 2017.
Management expects to have sufficient working capital for continuing operations from either the sale of its products its subsidiaries' product and services revenue, or through the raising of additional capital through private offerings of our securities.securities and improved cash flows from operations including the two acquisitions that closed in May 2021. The Company also secured bank lines of credit totaling $9.3 million in 2021. Additionally, as of the date of this Report, the Company was in negotiationsis monitoring additional businesses to acquire two businesses, which management believeshopes will provide additional operating revenues to the Company. There can be no guarantee that the planned acquisitions will close or that they will produce the anticipated revenues on the schedule anticipated by management, or at all.
The Company used cash from operating activitiesalso may elect to seek additional bank financing, engage in debt financing through a placement agent, or sell shares of $872,969 for the nine months ended September 30, 2017 (Successor). This compares with cash used of $72,935 for the three months ended March 31, 2016 (Predecessor) and cash generated of $30,831 for the six months ended September 30, 2016 (Successor). The increase is due to a larger loss and the increase of inventory.
Off-Balance Sheet Arrangements
The Company has not entered into any transactions with unconsolidated entities whereby the Company has financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose the Company to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to the Company.
Critical Accounting Policies and Estimates
Our consolidated financial statements and related disclosuresare prepared in conformityaccordance with U.S. generally accepted accounting principles ("in the United States, or U.S. GAAP") and the Company's discussion and analysisGAAP. Preparation of itsthese financial condition and operating results require the Company's managementstatements requires us to make judgments,estimates and assumptions and estimates that affect the reported amounts reported in its condensed consolidated financial statementsof assets, liabilities, revenue, costs and accompanying notes. Note 2, "Summary of Significant Accounting Policies," of this Form 10-Q describes the significant accounting policiesexpenses and methods used in the preparation of the Company's condensed consolidated financial statements. Management bases itsrelated disclosures. We base our estimates on historical experience and on various other assumptions it believesthat we believe to be reasonable underreasonable. In many instances, we could have reasonably used different accounting estimates and in other instances changes in the circumstances, the resultsaccounting estimates are reasonably likely to occur from period to period. This applies in particular to useful lives of which form the basis for making judgments about the carrying values ofnon-current assets and liabilities. Actual results may differ from these estimates and such differences may be material.
For a summary of Long-Lived Assets
As a Smaller Reporting Company, the Company is not required to include the disclosure under this Item.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report, JuneSeptember 30, 2017.2021. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company's reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure.
Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report due to the following material weaknesses in our internal control over financial reporting, many of which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) inadequate control activities and monitoring processes; and (iii) failure in the process for identification and disclosure of related party transactions; and (iv) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both U.S. GAAP and SEC guidelines.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2017,2021, that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
From time to time, the Company may become involved in lawsuits and other legal proceedings that arise in the course of business. Litigation is subject to whichinherent uncertainties, and it is not possible to predict the outcome of litigation with total confidence. As of the date of this Report, the Company was not aware of any legal proceedings or potential claims against it whose outcome would be likely, individually or in the aggregate, to have a material adverse effect on the Company’s business, financial condition, operating results, or cash flows.
In June 2020, the Company’s subsidiary Excel Fabrication, LLC filed a lawsuit against Fusion Mechanical, LLC, in the Fifth Judicial District Court, State of Idaho (Case Number CV42-20-2246). The Company claimed tortious interference and trade secret violations by the defendant. The defendant filed a motion to dismiss, which was denied by the Court. As of the date of this Report, discovery was proceeding. The defendant filed a second motion to dismiss and the Company filed a memorandum in response to the second motion to dismiss, for which a hearing was held on May 10, 2021. On June 11, 2021, the court issued a decision narrowing the claims of the plaintiffs to three items: breach of contract, good faith and fair dealings and intentional interference for economic advantage. These were the Company’s three main points of contention. As of the date of this Report, discovery was proceeding. The Company intends to pursue vigorously its claims.
In August 2020, the Company filed a lawsuit in the United States District Court, District of Arizona (Case No.2:20-cv-01679-DJH), against Alan Martin, the seller of Horizon Well Testing LLC (“HWT”) dba Venture West Energy Services, LLC. The Company brought claims for breach of contract, including but not limited to breaches of the seller’s representations and warranties in the purchase agreement in connection with the acquisition of HWT. The defendant answered and counterclaimed, claiming breach by the Company of its obligation to issue a promissory note (to be issued in connection with the acquisition of HWT). The parties have engaged in discovery and settlement negotiations, both of which were ongoing as of the date of this Report. Additionally, a settlement conference is scheduled for November 18, 2021.
In May 2021, the Company and several shareholders filed a partylawsuit in the United States District Court for the District of Arizona (Case number 2:21-cv-00886-MTL) against Fin Capital LLC ("Fin Cap"), and Grizzly Research LLC ("Grizzly") alleging securities fraud, tortious interference with business expectancy and libel slander for disseminating false and misleading statements about Alpine 4 and its employees to manipulate the stock price and further their own financial interests. As of the date of this Report, Fin Cap has not been served with the Complaint. The Company plans to move for an order permitting public service of the Complaint on Fin Cap pursuant to Arizona law.
Item 1A.RISK FACTORS
Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, includes a detailed discussion of the Company’s risk factors. However, many of the risk factors disclosed in Item 1A of our Annual Report may be further heightened or asexacerbated by the impact of the COVID-19 pandemic.
We continue to face risks related to Novel Coronavirus (COVID-19) which have significantly disrupted our manufacturing, research and development, operations, sales and financial results, and could continue to do so for the foreseeable future.
Our business has been and will continue to be adversely impacted by the effects of the Novel Coronavirus (“COVID-19”), although we are seeking to resume and rebuild operations of all of our subsidiaries to pre-COVID-19 levels. Nevertheless, in addition to global macroeconomic effects, the COVID-19 outbreak and any other related adverse public health developments may continue to cause disruption to our international operations and sales activities. Our third-party manufacturers, suppliers, third-party distributors, sub-contractors and customers have been and will be disrupted by worker absenteeism, quarantines and restrictions on our employees’ ability to work, office and factory closures, disruptions to ports and other shipping infrastructure, border closures, or other travel or health-related restrictions. Depending on the magnitude of such effects on our manufacturing, assembling, and testing activities or the operations of our suppliers, third-party distributors, or sub-contractors, our supply chain, manufacturing and product shipments will be delayed, which could adversely affect our business, operations and customer relationships. In addition, COVID-19 and its variants or other disease outbreak will in the short-run and may over the longer term adversely affect the economies and financial markets of many countries, resulting in an economic downturn that will affect demand for our products and impact our operating results. There can be no assurance that any decrease in sales resulting from the COVID-19 outbreak will be offset by increased sales in subsequent periods. Although the magnitude of the impact of the COVID-19 outbreak on our business and operations remains uncertain, the continued spread of COVID-19 and any of its propertyvariants or the occurrence of other epidemics and the imposition of related public health measures and travel and business restrictions will adversely impact our business, financial condition, operating results and cash flows. In addition, we have experienced and will experience disruptions to our business operations resulting from quarantines, self-isolations, or other movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to develop and design our products in a timely manner or meet required milestones or customer commitments.
The impact on our operations of shortages, or additional shortages that may surface, related to COVID-19 is subject,uncertain, but could potentially impact our future sales, manufacturing operations and no such proceedingsfinancial results. Continued progression of these circumstances could result in a decline in customer orders, as our customers could shift purchases to lower-priced or other perceived value offerings or reduce their purchases and inventories due to decreased budgets, reduced access to credit or various other factors, and impair our ability to manufacture our products, which could have a material adverse impact on our results of operations and cash flow. While the current impacts of COVID-19 are knownreflected in our results of operations, we cannot at this time separate the direct COVID-19 impacts from other factors that cause our performance to vary from quarter to quarter. The ultimate duration and impact of the CompanyCOVID-19 pandemic on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration and severity of the pandemic, and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of its national and, to some extent, global economic impact. Furthermore, the extent to which our mitigation efforts are successful, if at all, is not presently ascertainable. However, our results of operations in future periods may continue to be threatened or contemplated against it.
Issuances in 2021
In January 2021, the quarterCompany issued 1,432,244 shares of Series D Preferred Stock in connection with the Vayu (US) merger transaction.
The shares of Series D Preferred Stock issued in connection with the Vayu (US) merger transaction were issued without registration under the 1933 Act in reliance on Section 4(a)(2) of the 1933 Act and the rules and regulations promulgated thereunder.
In the nine-months ended September 30, 2017,2021, the Company issued 106,000an aggregate of 7,384,018 shares of its restricted Class A common stock for convertible debt of $1,886,898 from 2020.
The shares of Class A common stock referenced above that were issued in 2021, were issued without registration under the 1933 Act in reliance on Section 4(a)(2) of the 1933 Act and the rules and regulations promulgated thereunder.
In May 2021, the Company issued 281,223 shares of Class A common stock in connection with services, 177,342the TDI acquisition.
The shares for note conversionsof Class A common stock issued in connection with the TDI acquisition were issued without registration under the 1933 Act in reliance on Section 4(a)(2) of the 1933 Act and 500,000the rules and regulations promulgated thereunder.
In May 2021, the Company issued 361,787 shares which are fully returnableof Class A common stock in connection with the Alt Labs acquisition.
The shares of Class A common stock issued in connection with the Alt Labs acquisition were issued were issued without registration under the 1933 Act in reliance on Section 4(a)(2) of the 1933 Act and the rules and regulations promulgated thereunder.
On April 30, 2021, the Company issued 1,617,067 shares of Class A common stock upon the payment of a convertible note. Of the 500,000 shares 150 000 have been released for return in exchange for another note with no issuanceconversion of shares onof Class C common stock by the second note.
The shares of Class A common stock issued upon conversion of the Class C common stock into Class A common stock were issued without registration under the 1933 Act in reliance on Section 4(a)(2) of the 1933 Act and the rules and regulations promulgated thereunder.
On May 17, 2021, the Company issued 350,000 shares of Class A common stock upon conversion of shares of Class B common stock by the holder of the Class B common stock.
The shares of Class A common stock issued upon conversion of the Class B common stock were issued without registration under the 1933 Act in reliance on Section 4(a)(2) of the 1933 Act and the rules and regulations promulgated thereunder.
On October 20, 2021, in connection with the purchase of the outstanding securities of Identified Technologies Corporation, the Company issued 888,881 shares of its Class A Common Stock.
The shares of Class A common stock issued in connection with the Identified Technologies Corporation acquisition were issued were issued without registration under the 1933 Act in reliance on Section 4(a)(2) of the 1933 Act and the rules and regulations promulgated thereunder.
On November 1, 2021, the Company issued 2,506,249 shares of Class A common stock for no additional consideration upon conversion of 1,652,591 shares of Series D Preferred Stock and 1,432,244 shares of Series C Preferred Stock.
The shares of Class A common stock issued upon conversion of the Series C and Series D Preferred Stock into Class A common stock were issued without registration under the 1933 Act in reliance on Section 4(a)(2) of the 1933 Act and the rules and regulations promulgated thereunder.
Item 4. Mine safety disclosures.
None
Not Applicable
Item 6. Exhibits.
Exhibit Number | Description | |
2.1 | Impossible Aerospace Merger Agreement dated November 13, 2020 (incorporated by reference to Exhibit 3.4 to Alpine 4’s Current Report on Form 8-K filed November 17, 2020). | |
2.2 | Vayu (US) Merger Agreement dated December 29, 2020 (incorporated by reference to Exhibit 3.4 to Alpine 4’s Current Report on Form 8-K filed January 4, 2021). | |
3.1 | Series C Preferred Stock Certificate of | |
3.2 | Series D Preferred Stock Certificate of Designation (incorporated by reference to Exhibit 3.4 to Alpine 4’s Current Report on Form 8-K filed | |
3.3 | Certificate of Amendment to Certificate of Incorporation | |
February 8, 2021). | ||
10.1 |
| |
10.2 |
| |
10.3 |
| |
10.4 |
| |
10.5 |
| |
10.6 |
| |
10.7 |
| |
10.8 | Membership Interest Purchase Agreement by and among A4 Manufacturing, Inc., Alpine 4 Holdings, Inc., Alternative Laboratories, LLC, KAI Enterprises, LLC, and Kevin Thomas (previously filed as Exhibit 10.1 to the Company’s Current Report filed on May 10, 2021, and incorporated herein by reference). | |
10.9 | Commercial Lease Agreement by and between 4740 Cleveland, LLC, and Alternative Laboratories, LLC (previously filed as Exhibit 10.4 to the Company’s Current Report filed on May 10, 2021, and incorporated herein by reference). | |
10.10 | Membership Interest Purchase Agreement by and among A4 Manufacturing, Inc., Alpine 4 Holdings, Inc., 4740 Cleveland, LLC, and Kevin Thomas (previously filed as Exhibit 10.5 to the Company’s Current Report filed on May 10, 2021, and incorporated herein by reference). | |
10.11 | Identified Technologies Corporation Stock Purchase Agreement, dated October 20, 2021(previously filed as Exhibit 10 to the Company’s Current Report filed on October 25, 2021, and incorporated herein by reference). | |
31.1 | ||
31.2 | Certification of Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | ||
32.2 | Certification of Chief Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101 INS | XBRL Instance | |
101 SCH | XBRL | |
101 CAL | XBRL | |
101 DEF | XBRL | |
101 LAB | XBRL | |
101 PRE | XBRL Presentation Linkbase | |
*The XBRL related information in Exhibit 101 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Alpine 4 | ||
Dated: November | ||
By: | /s/ Kent B. Wilson | |
Kent B. Wilson | ||
Chief Executive Officer | ||
(Principal Executive Officer) |
By: | /s/ Larry Zic | |
Larry Zic | ||
Chief Financial Officer | ||
(Principal Financial Officer) |
32