[X] | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2018 | |
[ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from _______ to __________ |
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) |
Large accelerated filer | ◻ | Accelerated filer | ◻ |
Non-accelerated filer | ⌧ | Smaller reporting company | ⌧ |
Emerging Growth Company | ⌧ |
PART I | Page | ||
ITEM 1. | BUSINESS | 3 | |
ITEM 1A. | RISK FACTORS | 9 | |
ITEM 1B. | UNRESOLVED STAFF COMMENTS | 15 | |
ITEM 2. | PROPERTIES | 15 | |
ITEM 3. | LEGAL PROCEEDINGS | 15 | |
ITEM 4. | MINE SAFETY DISCLOSURES | 16 | |
PART II | |||
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 16 | |
ITEM 6. | SELECTED FINANCIAL DATA | 20 | |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 20 | |
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 24 | |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 24 | |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES | 24 | |
ITEM 9A. | CONTROLS AND PROCEDURES | 24 | |
ITEM 9B. | OTHER INFORMATION | 25 | |
PART III | |||
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE | 26 | |
ITEM 11. | EXECUTIVE COMPENSATION | 28 | |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 28 | |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | 30 | |
ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES | 30 | |
PART IV | |||
ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES | 30 | |
SIGNATURES | 60 |
• | Alpine 4 Mini MBA program; and |
• | An Alpine 4 developed ERP (Enterprise Resource Planning system) and collaboration system called SPECTRUMebos. SPECTRUMebos is an Enterprise Business Operating System (ebos). This system will combine the key technology software components of Accounting and Financial Reporting, an Enterprise Resource Planning System (ERP), a Document Management System (DMS), a Business Intelligence (BI) platform and a Customer Resource Management (CRM) hub which will be tethered to management reporting and collaboration toolsets. Management believes that these tools will help drive real-time information in two directions: first, to the front lines by empowering customer-facing stakeholders; and second, back to management for planning, problem solving, and integration. Management believes that SPECTRUMebos will be the technology “secret sauce” in managing our portfolio of companies and, in time, may be offered to external customers. |
• | ALTIA, LLC is an automotive technology company with several core product offerings. | |
• | 6th Sense Auto is a connected car technology that provides a distinctive and powerful advantage to management, sales, finance and service departments at automotive dealerships in order to increase productivity, profitability and customer retention. 6thSenseAuto uses disruptive technology to improve inventory management, reduce costs, increase sales, and enhance service. | |
• | BrakeActive™ is a safety device that can improve a vehicle’s third brake light’s ability to greatly reduce or prevent a rear end collision by as much as 40%. According to a National Highway Traffic Safety Administration report issued in 2010, rear end collisions could be reduced by 90% if trailing vehicles had one additional second to react. The Company’s new programmable technology and device aims to provide this additional reaction time to trailing vehicles. | |
• | Quality Circuit Assembly (“QCA”) - Since 1988, QCA has been providing electronic contract manufacturing solutions delivered to its customers via strategic business partnerships. Our abilities encompass a wide variety of skills, beginning with prototype development and culminating in the ongoing manufacturing of a complete product or assembly. Turnkey solutions are tailored around each customer's specific requirements. Conveniently located in San Jose, California, with close proximity to San Jose airport and all major carriers, QCA’s primary aim is to provide contract-manufacturing solutions to market leading companies within the industrial, scientific, instrumentation, military, medical and green industries. | |
• | American Precision Fabricators (“APF”) – Based in Fort Smith, Arkansas, APF is a sheet metal fabricator that provides American made fabricated metal parts, assemblies and sub-assemblies to Original Equipment Manufacturers (“OEM”). The Company supplies several industries with fabricated parts that it creates in-house. It offers several production capabilities with its state-of-the-art machinery. | |
• | Morris Sheet Metal (“MSM”) – Based in Fort Wayne, Indiana, MSM is a commercial sheet metal contractor and fabricator. MSM designs, fabricates, and installs dust collectors, commercial ductwork, kitchen hoods, industrial ventilation systems, machine guards, architectural work, water furnaces, and much more. | |
• | JTD Spiral (“JTD”) - Based in Fort Wayne, Indiana, JTD is a sister company to MSM and provides specialized spiral duct work to MSM clientele. |
• | Based in Fort Wayne, Indiana, MSM is commercial sheet metal contractor and fabricator. MSM designs, fabricates, and installs dust collectors, commercial ductwork, kitchen hoods, industrial ventilation systems, machine guards, architectural work, water furnaces, and much more. |
• | Based in Fort Wayne, Indiana, JTD is a sister company to MSM and provides specialized spiral duct work to MSM clientele. |
On June 4, 2018, the Company entered into a variable convertible note for $165,000 with net proceeds of $151,500. The note is due January 21, 2019, as amended, and bears interest at 10% per annum. The note is immediately convertible into shares of the Company's Class A common stock at a discount of 42% to the average of the two lowest trading closing prices of the stock for ten days prior to conversion. The Company issued 850,000 shares of Class A common stock to the note holder which are returnable if no event of default has occurred and the note is paid in full within 180 days of the note date. As of the date of this filing this note has been paid off.
• | The competitive environment in the industries in which our subsidiaries operate that may force us to reduce prices below the optimal pricing level or increase promotional spending; |
• | Our ability to anticipate changes in consumer preferences and to meet customers' needs for our products in a timely cost effective manner; and |
• | Our ability to establish, maintain and eventually grow market share in these competitive environments. |
• | ability to keep satisfied vendor relationships |
• | hiring and training qualified personnel in local markets; |
• | managing marketing and development costs at affordable levels; |
• | cost and availability of labor; |
• | the availability of, and our ability to obtain, adequate supplies of ingredients that meet our quality standards; and |
• | securing required governmental approvals in a timely manner when necessary. |
• | announcements of new products, brands, commercial relationships, acquisitions or other events by us or our competitors; |
• | regulatory or legal developments in the United States and other countries; |
• | fluctuations in stock market prices and trading volumes of similar companies; |
• | general market conditions and overall fluctuations in U.S. equity markets; |
• | variations in our quarterly operating results; |
• | changes in our financial guidance or securities analysts' estimates of our financial performance; |
• | changes in accounting principles; |
• | our ability to raise additional capital and the terms on which we can raise it; |
• | sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders; |
• | additions or departures of key personnel; |
• | discussion of us or our stock price by the press and by online investor communities; and |
• | other risks and uncertainties described in these risk factors. |
2019 | 2018 | 2017 | ||||||||||||||||||||||
High | Low | High | Low | High | Low | |||||||||||||||||||
First Quarter | $ | 0.05 | $ | 0.0269 | $ | 0.34 | $ | 0.123 | $ | 14.00 | $ | 2.40 | ||||||||||||
Second Quarter | $ | 0.20 | $ | 0.050 | $ | 2.54 | $ | 0.12 | ||||||||||||||||
Third Quarter | $ | 0.18 | $ | 0.068 | $ | 0.25 | $ | 0.09 | ||||||||||||||||
Fourth Quarter | $ | 0.05 | $ | 0.115 | $ | 0.46 | $ | 0.098 |
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted- average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders | 1,790,000 | $ | 0.19 | 210,000 | ||||||||
Equity compensation plans not approved by security holders | ||||||||||||
Total | 1,790,000 | $ | 0.19 | 210,000 |
• | Alpine 4 Mini MBA program; and |
• | An Alpine 4 developed ERP (Enterprise Resource Planning system) and collaboration system called SPECTRUMebos. SPECTRUMebos is an Enterprise Business Operating System (ebos). This system will combine the key technology software components of Accounting and Financial Reporting, an Enterprise Resource Planning System (ERP), a Document Management System (DMS), a Business Intelligence (BI) platform and a Customer Resource Management (CRM) hub which will be tethered to management reporting and collaboration toolsets. Management believes that these tools will help drive real-time information in two directions: first, to the front lines by empowering customer-facing stakeholders; and second, back to management for planning, problem solving, and integration. Management believes that SPECTRUMebos will be the technology "secret sauce" in managing our portfolio of companies and, in time, may be offered to external customers. |
Year Ended December 31, 2018 | Year Ended December 31, 2017 | $ Change | ||||||||||
Revenue | $ | 14,261,794 | $ | 8,318,016 | $ | 5,943,778 | ||||||
Cost of revenue | 9,440,998 | 5,907,421 | 3,533,577 | |||||||||
Gross Profit | 4,820,796 | 2,410,595 | 2,410,201 | |||||||||
Operating expenses: | ||||||||||||
General and administrative expenses | 5,470,148 | 2,814,111 | 2,656,037 | |||||||||
Total operating expenses | 5,470,148 | 2,814,111 | 2,656,037 | |||||||||
Loss from operations | (649,352 | ) | (403,516 | ) | (245,836 | ) | ||||||
Other expenses | ||||||||||||
Interest expense | 3,121,201 | 1,262,493 | 1,858,708 | |||||||||
Change in value of derivative liabilities | (604,219 | ) | 126,054 | (730,273 | ) | |||||||
Gain on extinguishment of debt | (6,305 | ) | 0 | (6,305 | ) | |||||||
Other (income) | (119,737 | ) | (246,895 | ) | 127,158 | |||||||
Total other expenses | 2,390,940 | 1,141,652 | 1,249,288 | |||||||||
Loss before income tax | (3,040,292 | ) | (1,545,168 | ) | (1,495,124 | ) | ||||||
Income tax expense | (43,399 | ) | (258,392 | ) | 214,993 | |||||||
Loss from continuing operations | (2,996,893 | ) | (1,286,776 | ) | (1,710,117 | ) | ||||||
Discontinue operations | (4,911,124 | ) | (1,710,644 | ) | (3,200,480 | ) | ||||||
Net loss | $ | (7,908,017 | ) | $ | (2,997,420 | ) | $ | (4,910,597 | ) |
Years Ended | ||||||||
December 31, | December 31, | |||||||
2018 | 2017 | |||||||
Revenue | $ | 3,040,458 | $ | 1,773,474 | ||||
Cost of revenue | 2,974,313 | 2,288,815 | ||||||
Gross Profit | 66,145 | (515,341 | ) | |||||
Operating expenses | 5,045,078 | 890,856 | ||||||
Loss from operations | (4,978,933 | ) | (1,406,197 | ) | ||||
Other income (expenses) | 67,809 | (304,447 | ) | |||||
Net loss | $ | (4,911,124 | ) | $ | (1,710,644 | ) |
Payments due by Period | ||||||||||||||||||||
Less than One Year | One to Three Years | Three to Five Years | More Than Five Years | Total | ||||||||||||||||
Capital lease obligations | 817,181 | 1,685,667 | 1,740,779 | 8,763,471 | 13,007,098 | |||||||||||||||
Operating lease obligations | 274,118 | 573,154 | - | - | 847,272 | |||||||||||||||
Notes payable, related parties | 132,000 | - | - | - | 132,000 | |||||||||||||||
Notes payable, non-related parties | 3,645,603 | 4,450,566 | 66,875 | - | 8,163,044 | |||||||||||||||
Convertible notes payable | 3,587,587 | 450,000 | - | - | 4,037,587 | |||||||||||||||
Total | 8,456,489 | 7,159,387 | 1,807,654 | 8,763,471 | 26,187,001 |
• | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles; |
• | provide reasonable assurance that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements. |
• | inadequate segregation of duties |
• | inadequate control activities and monitoring processes over financial reporting |
Name | Age | Officer/Position | Board Member/Position |
Kent B. Wilson | 45 | President, Chief Executive Officer | Director |
Charles Winters | 40 | N/A | Chairman of the Board |
Scott Edwards | 62 | N/A | Director |
Ian Kantrowitz | 36 | N/A | Director |
Jeffrey Hail | 55 | Sr. Vice President |
Name and Principal Position | Number of Late Reports | Transactions not Reported in Timely Manner | Known Failures to File a Required Form |
Kent Wilson, CEO, Director | 1 | 1 | None |
Charles Winters, Director | 0 | 1 | 1 |
Scott Edwards, Director | 1 | 1 | None |
Ian Kantrowitz, Director | 2 | 2 | None |
Name | Fees earned or paid in cash | Stock awards | Option awards | Non-equity incentive plan compensation | Nonqualified deferred compensation earnings | All other compensation | Total | |||||||||||||||||||||
($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | |||||||||||||||||||||
Ian Kantrowitz | $ | 0 | 26,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 26,000 | |||||||||||||||
Kent Wilson | $ | 0 | 44,200 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 44,200 | |||||||||||||||
Charles Winters | $ | 0 | 26,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 26,000 | |||||||||||||||
Scott Edwards | $ | 0 | 7,800 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 7,800 |
• | 28,507,853, shares of Alpine 4 Class A common stock outstanding as of March 31, 2019 |
• | 5,000,000 shares of Alpine 4 Class B common stock outstanding as of March 31, 2019. |
Name and Address of beneficial owner (1) | Amount of beneficial ownership of Class A Common Stock | Amount of beneficial ownership of Class B Common Stock | Percentage of Class A Common Stock (2) | Percentage of Class B Common Stock | Voting Power (3) | |||||||||||||||
Kent B. Wilson, Chief Executive Officer, Director(4) | 2,401,689 | 1,850,000 | 9.40 | % | 37.00 | % | 27.67 | % | ||||||||||||
Jeff Hail, Chief Operating Officer | 541,000 | 350,000 | 2.12 | % | 7.00 | % | 5.35 | % | ||||||||||||
Scott Edwards, Director (5) | 252,000 | 350,000 | 0.99 | % | 7.00 | % | 4.97 | % | ||||||||||||
Charles Winters, Director (6) | 709,800 | 700,000 | 2.78 | % | 14.00 | % | 10.21 | % | ||||||||||||
Ian Kantrowitz, Director (7) | 847,371 | 700,000 | 3.32 | % | 14.00 | % | 10.39 | % | ||||||||||||
Richard Evans 515 W. Coliseum Blvd Ft. Wayne, IN 46808 | 3,270,000 | 0 | 12.80 | % | 0 | % | 4.33 | % | ||||||||||||
All Officers and Directors As a Group (5 persons) | 4,751,860 | 3,950,000 | 18.61 | % | 79.00 | % | 58.58 | % |
(1) | Except as otherwise indicated, the address of the stockholder is: Alpine 4 Technologies Ltd., 2525 E Arizona Biltmore Cir, Suite 237, Phoenix AZ 85016. |
(2) | The percentages listed in the table are based on 28,507,853 shares of Alpine 4 Class A common stock outstanding as of March 31, 2019. |
(3) | The Voting Power column includes the effect of shares of Class B common stock held by the named individuals, as indicated in the footnotes below. Each share of Class B common stock has 10 votes. The total voting power for each person is also explained in the footnotes below. |
(4) | Mr. Wilson owned as of the date of this Report 2,401,689 shares of Class A common stock, and 1,850,000 shares of Class B common stock, which represents an aggregate of 20,901,689 votes, or approximately 27.67% of the voting power. |
(5) | Mr. Edwards owned as of the date of this Report 252,000 shares of Class A Common Stock. Additionally, Mr. Edwards owned 350,000 shares of Alpine 4 Class B Common Stock which together with the Class A Common Stock will represent an aggregate of 3,752,000 votes, or approximately 4.97 % of the voting power. |
(6) | Mr. Winters owned as of the date of this Report 709,800 shares of Class A Common Stock. Additionally, Mr. Winters owns 700,000 shares of Alpine 4 Class B Common Stock which together with the Class A Common Stock will represent an aggregate of 7,709,800 votes, or approximately 10.21% of the voting power. |
(7) | Mr. Kantrowitz owned as of the date of this Report 847,371 shares of Class A Common Stock. Additionally, Mr. Kantrowitz owned 700,000 shares of Alpine 4 Class B Common Stock which together with the Class A Common Stock will represent an aggregate of 7,847,371 votes, or approximately 10.39% of the voting power. |
(8) | Mr. Jeff Hail owned as of the date of this Report 541,000 shares of Class A Common Stock. Additionally, Mr. Hail owned 350,000 shares of Alpine 4 Class B Common Stock which together with the Class A Common Stock will represent an aggregate of 4,041,000 votes, or approximately 5.35% of the voting power. |
Page | |
Financial Statements: | |
Report of Independent Registered Public Accounting Firm | 32 |
Consolidated Balance Sheets as of December 31, 2018 and 2017 | 33 |
Consolidated Statements of Operations for the Years Ended December 31, 2018 and 2017 | 34 |
Consolidated Statements of Stockholders' Deficit for the Years Ended December 31, 2018 and 2017 | 35 |
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018 and 2017 | 36 |
Notes to Consolidated Financial Statements | 37 |
To the Board of Directors and Stockholders of |
Alpine 4 Technologies, Ltd. |
Phoenix, Arizona |
December 31, | December 31, | |||||||
2018 | 2017 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash | $ | 207,205 | $ | 128,512 | ||||
Accounts receivable | 2,610,354 | 1,560,480 | ||||||
Inventory | 2,175,795 | 1,212,546 | ||||||
Capitalized contract costs | 64,234 | - | ||||||
Prepaid expenses and other current assets | 222,200 | 154,385 | ||||||
Assets of discontinued operations | 121,296 | 574,174 | ||||||
Total current assets | 5,401,084 | 3,630,097 | ||||||
Property and equipment, net | 7,990,556 | 5,023,758 | ||||||
Intangible asset, net | 677,210 | 752,622 | ||||||
Goodwill | 3,193,861 | 1,963,761 | ||||||
Other non-current assets | 290,238 | 258,238 | ||||||
Assets of discontinued operations | 387,727 | 4,342,474 | ||||||
TOTAL ASSETS | $ | 17,940,676 | $ | 15,970,950 | ||||
LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' DEFICIT | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 3,102,970 | $ | 1,367,989 | ||||
Accrued expenses | 1,254,853 | 739,645 | ||||||
Deferred revenue | 25,287 | 64,918 | ||||||
Derivative liabilities | 1,892,321 | 271,588 | ||||||
Deposits | 12,509 | 12,509 | ||||||
Notes payable, current portion | 3,645,603 | 1,814,689 | ||||||
Notes payable, related parties, current portion | 132,000 | 43,500 | ||||||
Convertible notes payable, current portion, net of discount of $942,852 and $79,630 | 2,644,735 | 2,302,620 | ||||||
Financing lease obligation, current portion | 105,458 | 24,590 | ||||||
Net liabilities of discontinued operations | 2,752,447 | 3,344,974 | ||||||
Total current liabilities | 15,568,183 | 9,987,022 | ||||||
Notes payable, net of current portion | 4,517,441 | - | ||||||
Convertible notes payable, net of current portion | 450,000 | 1,660,106 | ||||||
Financing lease obligations, net of current portion | 8,295,176 | 6,560,112 | ||||||
Deferred revenue | - | 43 | ||||||
Deferred tax liability | 608,304 | 181,703 | ||||||
TOTAL LIABILITIES | 29,439,104 | 18,388,986 | ||||||
REDEEMABLE COMMON STOCK | ||||||||
Class A Common stock, $0.0001 par value, 0 and 379,403 shares issued and outstanding at December 31, 2018 and 2017 | - | 1,439,725 | ||||||
STOCKHOLDERS' DEFICIT: | ||||||||
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding at December 31, 2018 and 2017 | - | - | ||||||
Class A Common stock, $0.0001 par value, 100,000,000 shares authorized, 26,567,410 and 23,222,087 shares issued and outstanding at December 31, 2018 and 2017 | 2,575 | 2,322 | ||||||
Class B Common stock, $0.0001 par value, 5,000,000 shares authorized, 5,000,000 and 1,600,000 shares issued and outstanding at December 31, 2018 and 2017 | 500 | 160 | ||||||
Additional paid-in capital | 17,018,591 | 16,573,632 | ||||||
Accumulated deficit | (28,520,094 | ) | (20,433,875 | ) | ||||
Total stockholders' deficit | (11,498,428 | ) | (3,857,761 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 17,940,676 | $ | 15,970,950 |
Years Ended December 31, | ||||||||
2018 | 2017 | |||||||
Revenue | $ | 14,261,794 | $ | 8,318,016 | ||||
Cost of revenue | 9,440,998 | 5,907,421 | ||||||
Gross Profit | 4,820,796 | 2,410,595 | ||||||
Operating expenses: | ||||||||
General and administrative expenses | 5,470,148 | 2,814,111 | ||||||
Total operating expenses | 5,470,148 | 2,814,111 | ||||||
Loss from operations | (649,352 | ) | (403,516 | ) | ||||
Other expenses | ||||||||
Interest expense | (3,121,201 | ) | (1,262,493 | ) | ||||
Change in value of derivative liability | 604,219 | (126,054 | ) | |||||
Gain on extinguishment of debt | 6,305 | - | ||||||
Other income | 119,737 | 246,895 | ||||||
Total other expenses | (2,390,940 | ) | (1,141,652 | ) | ||||
Loss before income tax | (3,040,292 | ) | (1,545,168 | ) | ||||
Income tax (benefit) | (43,399 | ) | (258,392 | ) | ||||
Loss from continuing operations | (2,996,893 | ) | (1,286,776 | ) | ||||
Discontinued operations: | ||||||||
Loss from discontinued operations | (4,911,124 | ) | (1,710,644 | ) | ||||
Total discontinued operations | (4,911,124 | ) | (1,710,644 | ) | ||||
Net loss | $ | (7,908,017 | ) | $ | (2,997,420 | ) | ||
Weighted average shares outstanding : | ||||||||
Basic | 28,447,969 | 23,858,031 | ||||||
Diluted | 28,447,969 | 23,858,031 | ||||||
Basic and Diluted Loss per shares | ||||||||
Continuing operations | $ | (0.11 | ) | $ | (0.06 | ) | ||
Discontinued operations | (0.17 | ) | $ | (0.07 | ) | |||
$ | (0.28 | ) | (0.13 | ) |
Additional | Total | |||||||||||||||||||||||||||
Class A Common Stock | Class B Common Stock | Paid-in | Accumulated | Stockholders' | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance, December 31, 2016 | 21,474,481 | $ | 2,148 | 1,600,000 | $ | 160 | $ | 16,228,106 | $ | (17,436,455 | ) | $ | (1,206,041 | ) | ||||||||||||||
Issuance of shares of common stock for cash | 132,209 | 13 | 39,987 | 40,000 | ||||||||||||||||||||||||
Issuance of shares of common stock to consultants for services | 578,640 | 57 | 62,027 | 62,084 | ||||||||||||||||||||||||
Issuance of shares of common stock for convertible note payable and accrued interest | 886,757 | 89 | 99,484 | 99,573 | ||||||||||||||||||||||||
Issuance shares for discount on convertible note payable | 150,000 | 15 | 16,485 | 16,500 | ||||||||||||||||||||||||
Reclassification of derivative liability | (252,633 | ) | (252,633 | ) | ||||||||||||||||||||||||
Derivative liability resolution | 222,099 | 222,099 | ||||||||||||||||||||||||||
Issuance of warrants for acquisition of VWES | 40,941 | 40,941 | ||||||||||||||||||||||||||
Share-based compensation expense | 87,136 | 87,136 | ||||||||||||||||||||||||||
Beneficial conversation feature associated with convertible notes | 30,000 | 30,000 | ||||||||||||||||||||||||||
Net loss | (2,997,420 | ) | (2,997,420 | ) | ||||||||||||||||||||||||
Balance, December 31, 2017 | 23,222,087 | 2,322 | 1,600,000 | 160 | 16,573,632 | (20,433,875 | ) | (3,857,761 | ) | |||||||||||||||||||
Adoption of ASC 606 | (178,202 | ) | (178,202 | ) | ||||||||||||||||||||||||
Issuance of shares for discount/inducement on convertible note payable | 1,849,999 | 104 | 65,910 | 66,014 | ||||||||||||||||||||||||
Issuance of shares of common stock for modification of debt | 100,000 | 10 | 14,990 | 15,000 | ||||||||||||||||||||||||
Issuance of shares of common stock for convertible note payable and accrued interest | 1,015,921 | 101 | 54,086 | 54,187 | ||||||||||||||||||||||||
Reclassification of shares from mezzanine | 379,403 | 38 | (38 | ) | - | |||||||||||||||||||||||
Change in fair value of warrant modification | 4,310 | 4,310 | ||||||||||||||||||||||||||
Shares issued for employee compensation | 3,400,000 | 340 | 176,460 | 176,800 | ||||||||||||||||||||||||
Derivative liability resolution | 58,018 | 58,018 | ||||||||||||||||||||||||||
Share-based compensation expense | 71,223 | 71,223 | ||||||||||||||||||||||||||
Net loss | (7,908,017 | ) | (7,908,017 | ) | ||||||||||||||||||||||||
Balance, December 31, 2018 | 26,567,410 | $ | 2,575 | 5,000,000 | $ | 500 | $ | 17,018,591 | $ | (28,520,094 | ) | $ | (11,498,428 | ) |
Years Ended December 31, | ||||||||
2018 | 2017 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (7,908,017 | ) | $ | (2,997,420 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 871,847 | 671,423 | ||||||
Amortization | 75,412 | 92,080 | ||||||
Gain on extinguishment of debt | (136,300 | ) | ||||||
Loss on disposal of fixed assets | 536,772 | 18,841 | ||||||
Change in value of derivative liabilities | (604,219 | ) | 126,054 | |||||
Employee stock compensation | 71,223 | 87,136 | ||||||
Stock issued for services | 176,800 | 62,084 | ||||||
Amortization of debt issuance | 213,354 | 50,500 | ||||||
Amortization of debt discounts | 1,428,954 | 89,292 | ||||||
Impairment of assets | 1,764,382 | - | ||||||
Change in current assets and liabilities: | ||||||||
Accounts receivable | 398,371 | (506,436 | ) | |||||
Inventory | (348,194 | ) | (282,432 | ) | ||||
Capitalized contracts costs | 37,300 | |||||||
Prepaid expenses and other assets | 159,927 | (120,379 | ) | |||||
Accounts payable | 1,441,304 | 546,825 | ||||||
Accrued expenses | 929,323 | 723,733 | ||||||
Income tax payable | (20,123 | ) | ||||||
Deferred tax | (43,399 | ) | (105,450 | ) | ||||
Deferred revenue | (319,410 | ) | 52,425 | |||||
Net cash used in operating activities | (1,254,570 | ) | (1,511,847 | ) | ||||
INVESTING ACTIVITIES: | ||||||||
Capital expenditures | (271,516 | ) | (192,805 | ) | ||||
Proceeds from insurance claim on automobiles and trucks | - | 237,732 | ||||||
Proceeds from the sale of fixed assets | 318,879 | - | ||||||
Acquisition, net of cash acquired | (1,976,750 | ) | (1,937,616 | ) | ||||
Net cash used in investing activities | (1,929,387 | ) | (1,892,689 | ) | ||||
FINANCING ACTIVITIES: | ||||||||
Proceeds from issuances of notes payable, related party | 145,000 | 105,500 | ||||||
Proceeds from issuances of notes payable, non-related party | 924,750 | 1,952,390 | ||||||
Proceeds from issuances of convertible notes payable | 2,355,950 | 785,500 | ||||||
Proceeds from sale of common stock | - | 40,000 | ||||||
Proceeds from sale leaseback transaction | 1,900,000 | - | ||||||
Repayments of notes payable, related party | (56,500 | ) | (223,500 | ) | ||||
Repayments of notes payable, non-related party | (741,079 | ) | (247,084 | ) | ||||
Repayments of convertible notes payable | (1,417,133 | ) | (219,721 | ) | ||||
Proceeds from line of credit, net | 327,325 | 709,201 | ||||||
Cash paid on financing lease obligations | (175,663 | ) | (1,691 | ) | ||||
Net cash provided by financing activities | 3,262,650 | 2,900,595 | ||||||
NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH | 78,693 | (503,941 | ) | |||||
CASH AND RESTRICTED CASH, BEGINNING BALANCE | 335,823 | 839,764 | ||||||
CASH AND RESTRICTED CASH, ENDING BALANCE | $ | 414,516 | $ | 335,823 | ||||
CASH PAID FOR: | ||||||||
Interest | $ | 1,162,149 | $ | 1,219,080 | ||||
Income taxes | $ | - | $ | 2,167 | ||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: | ||||||||
Common stock issued for convertible note payable and accrued interest | $ | 54,187 | $ | 99,573 | ||||
Common stock issued for convertible note discount | $ | 11,917 | $ | 16,500 | ||||
Issuance of convertible note for acquisition | $ | 450,000 | $ | 1,500,000 | ||||
Issuance of note payable for acquisition | $ | 1,950,000 | $ | 300,000 | ||||
Issuance of warrants for acquisition | $ | - | $ | 40,941 | ||||
Issuance of redeemable common stock for acquisition | $ | - | $ | 1,439,725 | ||||
Debt discount from convertible note payable | $ | - | $ | 30,000 | ||||
Debt discount due to derivative liabilities | $ | 2,282,970 | $ | 115,000 | ||||
Reclassification of warrants embedded conversion option as derivative liability | $ | - | $ | 252,633 | ||||
Notes payable and redeemable common stock restructuring | $ | 3,197,538 | $ | - | ||||
Capital leases | $ | 247,000 | $ | - | ||||
Proceeds from sale of assets offset directly against debt | $ | 1,141,588 | $ | - | ||||
Release of derivative liability | $ | 58,018 | $ | - |
December 31, | December 31, | |||||||
2018 | 2017 | |||||||
Cash | $ | 207,205 | $ | 128,512 | ||||
Restricted cash included in other non-current assets | 207,311 | 207,311 | ||||||
Total cash and restricted cash shown in consolidated statements of cash flows | $ | 414,516 | $ | 335,823 |
2018 | 2017 | |||||||
Raw materials | $ | 676,621 | $ | 577,259 | ||||
WIP | - | 440,586 | ||||||
Finished goods | 1,499,174 | 161,310 | ||||||
In Transit | - | 33,391 | ||||||
$ | 2,175,795 | $ | 1,212,546 |
Automobiles & Trucks | 10 to 20 years |
Buildings | 39 years |
Leasehold Improvements | 15 years or time remaining on lease (whichever is shorter) |
Equipment | 10 years |
2018 | 2017 | |||||||
Automobiles and trucks | $ | 155,179 | $ | - | ||||
Machinery and equipment | 2,548,855 | 1,276,779 | ||||||
Office furniture and fixtures | 109,619 | 7,056 | ||||||
Building | 5,795,000 | 3,895,000 | ||||||
Leasehold improvements | 261,608 | 261,608 | ||||||
Less: Accumulated depreciation | (879,705 | ) | (416,685 | ) | ||||
$ | 7,990,556 | $ | 5,023,758 |
Customer List | 15 years |
Non-compete agreements | 15 years |
Software development | 5 years |
2018 | 2017 | |||||||
Software | $ | 278,474 | $ | 278,474 | ||||
Noncompete | 100,000 | 100,000 | ||||||
Customer lists | 531,187 | 531,187 | ||||||
Less: Accumulated amortization | (232,451 | ) | (157,039 | ) | ||||
$ | 677,210 | $ | 752,622 |
Year Ending December 31, | ||||
2019 | 79,960 | |||
2020 | 79,960 | |||
2021 | 79,960 | |||
2022 | 46,361 | |||
2023 | 46,361 | |||
Thereafter | 344,608 | |||
Total | 677,210 |
2018 | 2017 | |||||||
Restricted Cash | $ | 207,311 | $ | 207,311 | ||||
Deposits | 50,927 | 50,927 | ||||||
Other | 32,000 | - | ||||||
$ | 290,238 | $ | 258,238 |
Year Ending December 31, | ||||
2019 | 817,181 | |||
2020 | 836,022 | |||
2021 | 849,645 | |||
2022 | 865,351 | |||
2023 | 875,428 | |||
Thereafter | 8,763,471 | |||
Total | 13,007,098 | |||
Less: Current capital leases and financing transaction | (105,458 | ) | ||
Less: imputed interest | (4,606,464 | ) | ||
Non-current capital leases and financing transaction | $ | 8,295,176 |
Year Ending December 31, | ||||
2019 | $ | 274,118 | ||
2020 | 282,342 | |||
2021 | 290,812 | |||
Thereafter | - | |||
Total | $ | 847,272 |
2018 | 2017 | |||||||
Lines of credit, current portion | $ | 2,504,440 | $ | 1,657,610 | ||||
Equipment loans, current portion | 260,301 | 147,079 | ||||||
Term notes, current portion | 880,862 | 10,000 | ||||||
Total current | 3,645,603 | 1,814,689 | ||||||
Long-term portion | 4,517,441 | - | ||||||
Total notes payable | $ | 8,163,044 | $ | 1,814,689 |
Year Ending December 31, | ||||
2019 | $ | 3,645,603 | ||
2020 | 4,271,959 | |||
2021 | 178,607 | |||
2022 | 66,875 | |||
Total | $ | 8,163,044 |
2018 | 2017 | |||||||
Notes payable; non-interest bearing; due upon demand; unsecured | $ | 4,500 | $ | 4,500 | ||||
Note payable; bearing interest at 8% per annum; due June 30, 2017; unsecured | 7,500 | 7,500 | ||||||
Note payable; bearing at 30% per annum; due March 3, 2018; unsecured | - | 11,500 | ||||||
Note payable; bearing at 20% per annum; due April 28, 2018; unsecured | - | 20,000 | ||||||
Series of notes payable, bearing interest at rates from 10% to 15% per annum, with maturity dates from April 2018 to July 2018, unsecured | 120,000 | - | ||||||
Total notes payable - related parties | $ | 132,000 | $ | 43,500 |
2018 | 2017 | |||||||
Series of convertible notes payable issued prior to December 31, 2016, bearing interest at rates of 8% - 20% per annum, with due dates ranging from April 2016 through October 2017. The outstanding principal and interest balances are convertible into shares of Class A common stock at the option of the debt holder at an exercise price of $1 per share. | $ | 25,000 | $ | 40,000 | ||||
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. The outstanding principal and interest balances are convertible after 12 months into Class A common stock at the option of the debt holder at a conversion price of $10 per share. | 1,654,588 | 1,827,108 | ||||||
Secured convertible note payable issued to the seller of VWES on January 1, 2017 for an aggregate of $1,500,000, bearing interest at 5% per annum, due in full on July 1, 2018. The outstanding principal and interest balances are convertible after 12 months into Class A common stock at the option of the debt holder at a conversion price of $8.50 per share. The amount was extinguished and replaced by the Amended and Restated Secured Promissory Note (see Note 9). | - | 1,500,000 | ||||||
Series of convertible notes payable issued in January 2017, bearing interest at rates of 10% per annum, and due in January 2018. The outstanding principal and interest balances are convertible into shares of Class A common stock at the option of the debt holder at an exercise price of $1 per share. | 10,000 | 30,000 |
On July 13, 2017, the Company entered into a variable convertible note for $43,000 with net proceeds of $40,000. The note is due April 30, 2018 and bears interest at 12% per annum. After 180 days, the note is convertible into shares of Class A common stock at a discount of 38% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion. The Company can prepay the note up to 180 days prior to the due date, with the prepayment penalty ranging from 10% to 27% depending on when prepaid. | - | 43,000 | ||||||
On July 19, 2017, the Company entered into a variable convertible note for $115,000 with net proceeds of $107,000. The note is due January 21, 2018 and bears interest at 10% per annum. The note is immediately convertible to the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion. The Company can prepay the convertible note up to 180 days from July 19, 2017. The Company issued 500,000 shares of Class A common stock to the note holder which are returnable if no event of default has occurred and the note is paid in full within 180 days of the note date. Management had determined that it was probable that the Company would meet the conditions under the note and therefore the shares and the cost of issuance were not recorded. During the three months ended March 31, 2018, the Company repaid the note and the shares were returned. | - | 72,748 | ||||||
On September 5, 2017, the Company entered into a variable convertible note for $105,000 with net proceeds of $100,000. The note is due September 5, 2018 and bears interest at 10% per annum. After 180 days, the note is convertible to the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion. The Company can prepay the convertible note up to 180 days from September 5, 2017. The prepayment penalty is equal to 10% to 25% of the outstanding note amount depending on the prepayment date. | - | 105,000 | ||||||
On October 4, 2017, the Company entered into a variable convertible note for $60,000 with net proceeds of $55,000. The note is due July 4, 2018 and bears interest at 12% per annum. After 180 days, the note is convertible into shares of Class A common stock at a discount of 35% of the lowest trading price during the previous ten days prior to conversion. The Company can prepay the convertible note up to 180 days from October 4, 2017. The prepayment penalty is equal to 10% to 25% of the outstanding note amount depending on the prepayment date. | - | 60,000 | ||||||
On October 11, 2017, the Company entered into a variable convertible note for $58,500 with net proceeds of $55,500. The note is due on July 20, 2018 and bears interest at 12% per annum. After 180 days, the note is convertible into shares of Class A common stock at a discount of 38% of the average of the three lowest trading prices of the stock for ten days prior to conversion. The Company can prepay the convertible note up to 180 days from October 11, 2017. The prepayment penalty is equal to 10% to 27% of the outstanding note amount depending on the prepayment date. | - | 58,500 | ||||||
On November 2, 2017, the Company entered into a variable convertible note for $115,000 with net proceeds of $107,000. The note is due May 2, 2018 and bears interest at 10% per annum. The note is immediately convertible to the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion. The Company issued 150,000 shares to the lender with this note, which has been recorded as a discount. | - | 115,000 | ||||||
On November 28, 2017, the Company entered into a variable convertible note for $105,000 with net proceeds of $100,000. The note is due November 28, 2018 and bears interest at 10% per annum. After 180 days, the note is convertible into shares of Class A common stock at a discount of 35% of the average of the three lowest trading price during the previous ten days prior to conversion. The Company can prepay the convertible note up to 180 days from November 28, 2017. The prepayment penalty is equal to 10% to 25% of the outstanding note amount depending on the prepayment date. | - | 105,000 |
On December 6, 2017, the Company entered into a variable convertible note for $86,000 with net proceeds of $79,000. Additional borrowings of $64,000 were received under this convertible note in January 2018. The note is due June 6, 2018 and bears interest at 10% per annum. After 180 days at the maturity date, the note is convertible to the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion. | - | 86,000 | ||||||
On January 10, 2018, the Company entered into a variable convertible note for $150,000 with net proceeds of $135,000. The note is due October 1, 2018 and bears interest at 12% per annum. The note is immediately convertible into shares of Class A common stock at the lesser of $0.16 per share or 60% of the lowest trading price the previous 25 days prior to conversion. The Company can prepay the note within the first 90 days following January 10, 2018 with a prepayment penalty equal to 145% of the total outstanding balance. The Company issued 333,333 shares to the lender with this note, which has been recorded as a discount. | 95,000 | - | ||||||
On March 13, 2018, the Company entered into a variable convertible note for $128,000 with net proceeds of $125,000. The note is due December 30, 2018 and bears interest at 12% per annum. After 180 days, the note is convertible into shares of Class A common stock at a discount of 42% of the average of the 2 lowest trading price the previous 10 days prior to conversion. The Company can prepay the note at a penalty ranging from 15% to 40%. | - | - | ||||||
On April 3, 2018, the Company entered into a variable convertible note for $85,000 with net proceeds of $79,000. The note is due January 2, 2019 and bears interest at 10% per annum. The note is immediately convertible into shares of the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion. In connection with this variable convertible note, the Company issued 386,363 shares of its Class A common stock, which has been recorded as a discount. | - | - | ||||||
On April 5, 2018, the Company entered into convertible promissory notes for an aggregate principal amount of $450,000 as part of the consideration for the acquisition of APF (see Note 9). The convertible notes are due in full in 36 months and bear interest at 4.25% per annum, and are convertible into shares of Class A common stock after 6 months from the issuance date at a rate of $1 per share. | 450,000 | - | ||||||
On April 9, 2018, the Company entered into a variable convertible note for $124,199 with net proceeds of $115,000. The note is due January 9, 2019 and bears interest at 12% per annum. After 180 days, the note is convertible into shares of the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion. In connection with this variable convertible note, the Company issued 76,670 shares of its Class A common stock, along with warrants to purchase 153,340 shares of Class A common stock at an exercise price of $1 per share which are immediately vested and have a 3 years contractual life. The value of the common stock and warrants have been recorded as a discount. | 61,699 | - | ||||||
On April 9, 2018, the Company entered into a variable convertible note for $37,800 with net proceeds of $35,000. The note is due January 9, 2019 and bears interest at 12% per annum. After 180 days, the note is convertible into shares of the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion. | 37,800 | - | ||||||
On June 4, 2018, the Company entered into a variable convertible note for $165,000 with net proceeds of $151,500. The note is due December 4, 2019 and bears interest at 10% per annum. The note is immediately convertible into shares of the Company's Class A common stock at a discount of 42% to the average of the two lowest trading closing prices of the stock for ten days prior to conversion. The Company issued 850,000 shares of Class A common stock to the note holder which are returnable if no event of default has occurred and the note is paid in full within 180 days of the note date. | 165,000 | - | ||||||
On July 16, 2018, the Company entered into a variable convertible note for $220,000 with net proceeds of $214,000. The note is due July 16, 2019 and bears interest at 10% per annum. The note is immediately convertible into shares of the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion. | - | - |
On July 18, 2018, the Company entered into a variable convertible note for $88,000 with net proceeds of $88,000. The note is due April 30, 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 42% to the average of the two lowest trading closing prices of the stock for ten days prior to conversion. | 88,000 | - | ||||||
On August 30, 2018, the Company entered into a variable convertible note for $337,500 with net proceeds of $303,750. The note is due February 28, 2019 and bears interest at 10% per annum. The note is immediately convertible into shares of the Company's Class A common stock at a discount of 42% to the average of the two lowest trading closing prices of the stock for ten days prior to conversion. | 337,500 | - | ||||||
On September 27, 2018, the Company entered into a variable convertible note for $93,000 with net proceeds of $93,000. The note is due July 15, 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 42% to the average of the two lowest trading closing prices of the stock for ten days prior to conversion. | 93,000 | - | ||||||
On October 23, 2018, the Company entered into a variable convertible note for $220,000 with net proceeds of $198,000. The note is due December 14,2018 and bears interest at 10% per annum. The note is immediately convertible into shares of the Company's Class A common stock at a discount of 42% to the average of the two lowest trading closing prices of the stock for ten days prior to conversion. | 220,000 | - | ||||||
On November 12, 2018, the Company entered into a variable convertible note for $670,000 with net proceeds of $636,000. The note is due November 12, 2019 and bears interest at 10% per annum. The note is immediately convertible into shares of the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion. | 670,000 | - | ||||||
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. | 130,000 | - | ||||||
Total convertible notes payable | 4,037,587 | 4,042,356 | ||||||
Less: discount on convertible notes payable | (942,852 | ) | (79,630 | ) | ||||
Total convertible notes payable, net of discount | 3,094,735 | 3,962,726 | ||||||
Less: current portion of convertible notes payable | (2,644,735 | ) | (2,302,620 | ) | ||||
Long-term portion of convertible notes payable | $ | 450,000 | $ | 1,660,106 |
Balance outstanding, December 31, 2016 | $ | 2,007,557 | ||
Issuance of convertible notes payable for acquisition of VWES | 1,500,000 | |||
Issuance of convertible notes payable for cash | 836,000 | |||
Repayment of notes | (219,721 | ) | ||
Conversion of notes payable to common stock | (88,902 | ) | ||
Discount from issuance of common stock | (16,500 | ) | ||
Discount from beneficial conversion feature | (30,000 | ) | ||
Discount from derivative liabilities | (115,000 | ) | ||
Amortization of debt discounts | 89,292 | |||
Balance outstanding, December 31, 2017 | 3,962,726 | |||
Issuance of convertible notes payable for acquisition of APF | 450,000 | |||
Issuance of convertible notes payable for cash | 2,355,950 | |||
Issuance for debt discounts | 147,341 | |||
Extinguishment of convertible note | (1,500,000 | ) | ||
Repayment of notes | (1,417,133 | ) | ||
Conversion of notes payable to common stock | (50,133 | ) | ||
Discount from beneficial conversion feature | (2,282,970 | ) | ||
Amortization of debt discounts | 1,428,954 | |||
Balance outstanding, December 31, 2018 | $ | 3,094,735 |
• | Issued 499,999 shares of its Class A common stock in connection with a convertible note payable. The note payable had an embedded conversion option that was a derivative, and the residual amount after allocating proceeds to the derivative was $0. Accordingly, no discount was recognized. |
• | Issued 120,000 shares of its Class A common stock in connection with the conversion of convertible notes payable and accrued interest with a value of $15,600. |
• | Issued 100,000 shares of the Company's Class A common stock related to the Amended Agreement with the seller of VWES. |
• | Issued 76,670 shares of Class A common stock in connection with a convertible note payable. The value of the shares amounted to $9,584 and has been recorded as a discount to the note payable. |
• | Issued 3,400,000 shares of Class B common stock to various employees, officers and board members as compensation. The value of the shares amounted to $176,800 and has been recorded as a component of general and administrative expenses for the year ended December 31, 2018. |
• | Issued 250,000 shares of Class A common stock for the conversion of $7,250 of outstanding convertible notes payable. |
• | Issued 23,330 shares of Class A common stock with debt valued at $2,333. |
• | Issued 274,295 shares of Class A common stock for the conversion of $14,000 of outstanding convertible notes payable. |
• | Issued 195,924 shares of Class A common stock for the conversion of $10,000 of outstanding convertible notes payable. |
• | Issued 175,702 shares of Class A common stock for the conversion of $3,883 of outstanding convertible notes payable and $3,454 of accrued interest. |
• | Issued 1,250,000 shares of Class A common stock as an inducement to investors to entering into convertible note agreements. |
• | Issued 578,640 shares of its Class A common stock for services. Total expense for the shares issued for services was $62,084; |
• | Issued 886,757 shares of its Class A common stock in connection with the conversion of convertible notes payable and accrued interest with a value of $99,573; |
• | Issued 132,209 shares of the Company's restricted Class A common stock in private placement transactions to investors, in exchange for capital raised of $40,000; and |
• | Issued 150,000 Class A common stock to a lender valued at $16,500. |
2018 | 2017 | |||||||
Risk free rate | 2.38 | % | 2.38 | % | ||||
Volatility | 200 | % | 200 | % | ||||
Expected terms (years) | 6.25 | 6.25 | ||||||
Dividend rate | 0 | % | 0 | % |
Weighted- | ||||||||||||||||
Weighted- | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Exercise | Contractual | Intrinsic | ||||||||||||||
Options | Price | Life (Years) | Value | |||||||||||||
Outstanding at December 31, 2016 | - | $ | 0.00 | |||||||||||||
Granted | 1,344,000 | 0.57 | ||||||||||||||
Forfeited | (561,750 | ) | 0.77 | |||||||||||||
Outstanding at December 31, 2017 | 782,250 | $ | 0.42 | 9.44 | $ | - | ||||||||||
Granted | 1,064,000 | 0.07 | ||||||||||||||
Forfeited | (56,250 | ) | 0.81 | |||||||||||||
Exercised | - | 0.00 | ||||||||||||||
Outstanding at December 31, 2018 | 1,790,000 | $ | 0.19 | 9.10 | $ | - | ||||||||||
Vested and expected to vest at December 31, 2018 | 1,790,000 | $ | 0.19 | 9.10 | $ | - | ||||||||||
Exercisable at December 31, 2018 | 391,969 | $ | 0.32 | 8.67 | $ | - |
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 | 9.38 | $ | 0.05 | 88,000 | $ | 0.05 | ||||||||||||||
0.10 | 85,000 | 9.28 | 0.10 | 10,625 | 0.10 | |||||||||||||||||
0.13 | 388,500 | 8.59 | 0.13 | 145,688 | 0.13 | |||||||||||||||||
0.26 | 114,000 | 8.34 | 0.26 | 49,875 | 0.26 | |||||||||||||||||
0.90 | 223,500 | 8.27 | 0.90 | 97,781 | 0.90 | |||||||||||||||||
1,790,000 | 391,969 |
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 |
Non-Cash | ||||
Consideration | ||||
Note payable | $ | 3,000,000 | ||
Common stock | 15,000 | |||
Warrants | 9,142 | |||
Land and building | 173,396 | |||
Total | $ | 3,197,538 |
Purchase Allocation | ||||
Accounts receivable | $ | 945,050 | ||
Inventory | 675,074 | |||
Prepaid expenses and other current assets | 250,040 | |||
Property and equipment | 3,300,000 | |||
Goodwill | 1,230,100 | |||
Accounts payable | (1,234,328 | ) | ||
Accrued expenses | (154,186 | ) | ||
Line of credit | (165,000 | ) | ||
Deferred tax liability | (470,000 | ) | ||
$ | 4,376,750 |
Pro Forma Combined Financials (Unaudited) | ||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | |||||||
Revenue | $ | 15,407,012 | $ | 11,995,811 | ||||
Net Loss from continuing operations | $ | (3,189,893 | ) | $ | (1,649,423 | ) | ||
Net loss per shares from continuing operations | $ | (0.12 | ) | $ | (0.07 | ) |
2018 | 2017 | |||||||||||||||
Amount | Percent | Amount | Percent | |||||||||||||
Federal statutory rates | $ | (1,660,684 | ) | 21.0 | % | $ | (1,106,976 | ) | 34.0 | % | ||||||
State income taxes | (474,481 | ) | 6.0 | % | (367,525 | ) | 11.3 | % | ||||||||
Permanent differences | 890,348 | -11.3 | % | 4,103 | -0.1 | % | ||||||||||
Impact of change in tax rate | - | 727,566 | 22.3 | % | ||||||||||||
Other | - | (27,282 | ) | 0.9 | % | |||||||||||
Valuation allowance against net deferred tax assets | 1,201,418 | -15.2 | % | 511,722 | -14.9 | % | ||||||||||
Effective rate | $ | (43,399 | ) | 0.5 | % | $ | (258,392 | ) | 53.5 | % |
2018 | 2017 | |||||||
Deferred income tax asset | ||||||||
Net operation loss carryforwards | $ | 2,607,105 | $ | 1,253,964 | ||||
Total deferred income tax asset | 2,607,105 | 1,253,964 | ||||||
Less: valuation allowance | (2,607,105 | ) | (1,253,964 | ) | ||||
Total deferred income tax asset | $ | - | $ | - |
2018 | 2017 | |||||||
Deferred income tax liabilities: | ||||||||
Book to tax differences in intangible assets | 608,304 | 181,703 | ||||||
Total deferred income tax asset | $ | 608,304 | $ | 181,703 |
Year Ended December 31, 2018 | ||||||||||||||||
Unallocated | ||||||||||||||||
and | Total | |||||||||||||||
QCA | APF | Eliminations | Consolidated | |||||||||||||
Revenue | $ | 10,513,743 | 3,104,791 | $ | 643,260 | $ | 14,261,794 | |||||||||
Segment gross profit | 3,293,86 | 1,078,075 | 449,535 | 4,820,796 | ||||||||||||
Segment depreciation and amortization | 299,328 | 200,247 | 33,333 | 532,908 | ||||||||||||
Segment interest expense | 734,033 | 153,107 | 2,234,061 | 3,121,201 | ||||||||||||
Segment net income (loss) | 390,158 | (455,125 | ) | (2,931,926 | ) | (2,996,893 | ) | |||||||||
As of December 31, 2018 | ||||||||||||||||
Unallocated | ||||||||||||||||
and | Total | |||||||||||||||
QCA | APF | Eliminations | Consolidated | |||||||||||||
Accounts receivable, net | $ | 1,649,701 | $ | 958,153 | $ | 2,500 | $ | 2,610,354 | ||||||||
Goodwill | 1,963,761 | 1,230,100 | - | 3,193,861 | ||||||||||||
Total assets | 10,767,883 | 6,159,098 | 1,013,695 | 17,940,676 | ||||||||||||
Year Ended December 31, 2017 | ||||||||||||||||
Unallocated | ||||||||||||||||
and | Total | |||||||||||||||
QCA | Eliminations | Consolidated | ||||||||||||||
Revenue | $ | 7,809,813 | $ | 508,203 | $ | 8,318,016 | ||||||||||
Segment gross profit | 2,191,078 | 219,517 | 2,410,595 | |||||||||||||
Segment depreciation and amortization | 289,746 | 50,001 | 339,747 | |||||||||||||
Segment interest expense | 730,096 | 532,397 | 1,262,493 | |||||||||||||
Segment net income (loss) | 327,511 | (1,614,287 | ) | (1,286,776 | ) | |||||||||||
As of December 31, 2017 | ||||||||||||||||
Unallocated | ||||||||||||||||
and | Total | |||||||||||||||
QCA | Eliminations | Consolidated | ||||||||||||||
Accounts receivable, net | $ | 1,545,422 | $ | 15,058 | $ | 1,560,480 | ||||||||||
Goodwill | 1,963,761 | - | 1,963,761 | |||||||||||||
Total assets | 10,569,893 | 5,401,057 | 15,970,950 |
2018 | 2017 | |||||||
Risk free rate | 2.63 | % | 2.38 | % | ||||
Volatility | 200 | % | 200 | % | ||||
Expected terms (years) | 0.5 to 3.0 | 0.5 to 2.67 | ||||||
Dividend rate | 0 | % | 0 | % |
Fair Value As of | Fair Value Measurements at | |||||||||||||||
December 31, | December 31, 2018 | |||||||||||||||
Description | 2018 | Using Fair Value Hierarchy | ||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Conversion feature on convertible notes | $ | 1,892,321 | $ | - | $ | 1,892,321 | $ | - | ||||||||
Fair Value As of December 31, | Fair Value Measurements at December 31, 2017 | |||||||||||||||
Description | 2017 | Using Fair Value Hierarchy | ||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Conversion feature on convertible notes | $ | 271,588 | $ | - | $ | 271,588 | $ | - |
Derivative liability balance, December 31, 2016 | $ | - | ||
Issuance of derivative liability during the period | 367,633 | |||
Derivative liability resolution | (222,099 | ) | ||
Change in derivative liability during the period | 126,054 | |||
Derivative liability balance, December 31, 2017 | 271,588 | |||
Issuance of derivative liability during the period | 2,282,970 | |||
Derivative liability resolution | (58,018 | ) | ||
Change in derivative liability during the period | (604,219 | ) | ||
Derivative liability balance, December 31, 2018 | $ | 1,892,321 |
2018 | 2017 | |||||||
Revenue | $ | 3,040,458 | $ | 1,773,474 | ||||
Cost of revenue | 2,974,313 | 2,288,815 | ||||||
Gross Profit | 66,145 | (515,341 | ) | |||||
Operating expenses | 5,045,078 | 890,856 | ||||||
Loss from operations | (4,978,933 | ) | (1,406,197 | ) | ||||
Other income (expenses) | 67,809 | (304,447 | ) | |||||
Net loss | $ | (4,911,124 | ) | $ | (1,710,644 | ) |
2018 | 2017 | |||||||
Current assets | $ | 121,296 | $ | 574,174 | ||||
Property and equipment | 387,727 | 4,174,629 | ||||||
Goodwill | - | 167,845 | ||||||
Total assets | 509,023 | 4,916,648 | ||||||
Current liabilities | 2,493,049 | 922,276 | ||||||
Notes payable - related party | 43,500 | 343,500 | ||||||
Notes payable | 215,898 | 2,079,198 | ||||||
Total liabilities | 2,752,447 | 3,344,974 |
Exhibit Number | Description | |
2.1 | Asset Purchase and Share Exchange Agreement (included as Annex A to the joint proxy statement/prospectus forming part of Alpine 4’s registration statement, previously filed with the SEC). | |
3.1 | ||
3.2 | ||
3.3 | ||
3.4 | ||
3.5 | ||
3.6 | ||
4.1 | ||
10.1 | ||
10.2 | ||
10.7 | ||
10.8 | ||
10.9 | ||
10.11 | ||
10.12 | ||
10.13 | ||
10.14 | ||
10.15 | ||
10.16 | ||
10.17 | ||
31.1 | ||
32.1 | ||
101 INS | XBRL Instance Document* | |
101 SCH | XBRL Schema Document* | |
101 CAL | XBRL Calculation Linkbase Document* | |
101 DEF | XBRL Definition Linkbase Document* | |
101 LAB | XBRL Labels Linkbase Document* | |
101 PRE | XBRL Presentation Linkbase Document* |
Date: April 22, 2019 | By: | /s/ Kent B. Wilson |
Name: | Kent B. Wilson | |
Title: Chief Executive Officer, Chief Financial Officer (Principal Executive Officer, Principal Financial and Accounting Officer), President, and Director |
/s/ Kent B. Wilson Kent B. Wilson | Chief Executive Officer, Chief Financial Officer, President, Director | April 22, 2019 |
/s/ Scott Edwards Scott Edwards | April 22, 2019 | |
/s/ Charles Winters Charles Winters | Chairman of the Board | April 22, 2019 |
/s/ Ian Kantrowitz Ian Kantrowitz | Director | April 22, 2019 |