0001606698 --12-31 false 2021 Q3 0001606698 2021-01-01 2021-09-30 0001606698 2021-09-30 0001606698 2020-06-30 0001606698 us-gaap:CommonClassAMember 2021-11-01 0001606698 us-gaap:CommonClassBMember 2021-11-01 0001606698 us-gaap:CommonClassCMember 2021-11-01 0001606698 2020-12-31 0001606698 us-gaap:SeriesBPreferredStockMember 2021-09-30 0001606698 us-gaap:SeriesBPreferredStockMember 2020-12-31 0001606698 us-gaap:SeriesCPreferredStockMember 2021-09-30 0001606698 us-gaap:SeriesCPreferredStockMember 2020-12-31 0001606698 us-gaap:SeriesDPreferredStockMember 2021-09-30 0001606698 us-gaap:SeriesDPreferredStockMember 2020-12-31 0001606698 us-gaap:CommonClassAMember 2021-09-30 0001606698 us-gaap:CommonClassAMember 2020-12-31 0001606698 us-gaap:CommonClassBMember 2021-09-30 0001606698 us-gaap:CommonClassBMember 2020-12-31 0001606698 us-gaap:CommonClassCMember 2021-09-30 0001606698 us-gaap:CommonClassCMember 2020-12-31 0001606698 2021-07-01 2021-09-30 0001606698 2020-07-01 2020-09-30 0001606698 2020-01-01 2020-09-30 0001606698 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001606698 us-gaap:RetainedEarningsMember 2020-12-31 0001606698 2021-01-01 2021-03-31 0001606698 us-gaap:SeriesBPreferredStockMember 2021-01-01 2021-03-31 0001606698 us-gaap:SeriesCPreferredStockMember 2021-01-01 2021-03-31 0001606698 us-gaap:SeriesDPreferredStockMember 2021-01-01 2021-03-31 0001606698 us-gaap:CommonClassAMember 2021-01-01 2021-03-31 0001606698 us-gaap:CommonClassBMember 2021-01-01 2021-03-31 0001606698 us-gaap:CommonClassCMember 2021-01-01 2021-03-31 0001606698 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001606698 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001606698 2021-03-31 0001606698 us-gaap:SeriesBPreferredStockMember 2021-03-31 0001606698 us-gaap:SeriesCPreferredStockMember 2021-03-31 0001606698 us-gaap:SeriesDPreferredStockMember 2021-03-31 0001606698 us-gaap:CommonClassAMember 2021-03-31 0001606698 us-gaap:CommonClassBMember 2021-03-31 0001606698 us-gaap:CommonClassCMember 2021-03-31 0001606698 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001606698 us-gaap:RetainedEarningsMember 2021-03-31 0001606698 2021-04-01 2021-06-30 0001606698 us-gaap:SeriesBPreferredStockMember 2021-04-01 2021-06-30 0001606698 us-gaap:SeriesCPreferredStockMember 2021-04-01 2021-06-30 0001606698 us-gaap:SeriesDPreferredStockMember 2021-04-01 2021-06-30 0001606698 us-gaap:CommonClassAMember 2021-04-01 2021-06-30 0001606698 us-gaap:CommonClassBMember 2021-04-01 2021-06-30 0001606698 us-gaap:CommonClassCMember 2021-04-01 2021-06-30 0001606698 us-gaap:AdditionalPaidInCapitalMember 2021-04-01 2021-06-30 0001606698 us-gaap:RetainedEarningsMember 2021-04-01 2021-06-30 0001606698 2021-06-30 0001606698 us-gaap:SeriesBPreferredStockMember 2021-06-30 0001606698 us-gaap:SeriesCPreferredStockMember 2021-06-30 0001606698 us-gaap:SeriesDPreferredStockMember 2021-06-30 0001606698 us-gaap:CommonClassAMember 2021-06-30 0001606698 us-gaap:CommonClassBMember 2021-06-30 0001606698 us-gaap:CommonClassCMember 2021-06-30 0001606698 us-gaap:AdditionalPaidInCapitalMember 2021-06-30 0001606698 us-gaap:RetainedEarningsMember 2021-06-30 0001606698 us-gaap:SeriesBPreferredStockMember 2021-07-01 2021-09-30 0001606698 us-gaap:SeriesCPreferredStockMember 2021-07-01 2021-09-30 0001606698 us-gaap:SeriesDPreferredStockMember 2021-07-01 2021-09-30 0001606698 us-gaap:CommonClassAMember 2021-07-01 2021-09-30 0001606698 us-gaap:CommonClassBMember 2021-07-01 2021-09-30 0001606698 us-gaap:CommonClassCMember 2021-07-01 2021-09-30 0001606698 us-gaap:AdditionalPaidInCapitalMember 2021-07-01 2021-09-30 0001606698 us-gaap:RetainedEarningsMember 2021-07-01 2021-09-30 0001606698 us-gaap:AdditionalPaidInCapitalMember 2021-09-30 0001606698 us-gaap:RetainedEarningsMember 2021-09-30 0001606698 2019-12-31 0001606698 us-gaap:SeriesBPreferredStockMember 2019-12-31 0001606698 us-gaap:SeriesCPreferredStockMember 2019-12-31 0001606698 us-gaap:SeriesDPreferredStockMember 2019-12-31 0001606698 us-gaap:CommonClassAMember 2019-12-31 0001606698 us-gaap:CommonClassBMember 2019-12-31 0001606698 us-gaap:CommonClassCMember 2019-12-31 0001606698 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001606698 us-gaap:RetainedEarningsMember 2019-12-31 0001606698 2020-01-01 2020-03-31 0001606698 us-gaap:SeriesBPreferredStockMember 2020-01-01 2020-03-31 0001606698 us-gaap:SeriesCPreferredStockMember 2020-01-01 2020-03-31 0001606698 us-gaap:SeriesDPreferredStockMember 2020-01-01 2020-03-31 0001606698 us-gaap:CommonClassAMember 2020-01-01 2020-03-31 0001606698 us-gaap:CommonClassBMember 2020-01-01 2020-03-31 0001606698 us-gaap:CommonClassCMember 2020-01-01 2020-03-31 0001606698 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0001606698 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0001606698 2020-03-31 0001606698 us-gaap:SeriesBPreferredStockMember 2020-03-31 0001606698 us-gaap:SeriesCPreferredStockMember 2020-03-31 0001606698 us-gaap:SeriesDPreferredStockMember 2020-03-31 0001606698 us-gaap:CommonClassAMember 2020-03-31 0001606698 us-gaap:CommonClassBMember 2020-03-31 0001606698 us-gaap:CommonClassCMember 2020-03-31 0001606698 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001606698 us-gaap:RetainedEarningsMember 2020-03-31 0001606698 2020-04-01 2020-06-30 0001606698 us-gaap:SeriesBPreferredStockMember 2020-04-01 2020-06-30 0001606698 us-gaap:SeriesCPreferredStockMember 2020-04-01 2020-06-30 0001606698 us-gaap:SeriesDPreferredStockMember 2020-04-01 2020-06-30 0001606698 us-gaap:CommonClassAMember 2020-04-01 2020-06-30 0001606698 us-gaap:CommonClassBMember 2020-04-01 2020-06-30 0001606698 us-gaap:CommonClassCMember 2020-04-01 2020-06-30 0001606698 us-gaap:AdditionalPaidInCapitalMember 2020-04-01 2020-06-30 0001606698 us-gaap:RetainedEarningsMember 2020-04-01 2020-06-30 0001606698 us-gaap:SeriesBPreferredStockMember 2020-06-30 0001606698 us-gaap:SeriesCPreferredStockMember 2020-06-30 0001606698 us-gaap:SeriesDPreferredStockMember 2020-06-30 0001606698 us-gaap:CommonClassAMember 2020-06-30 0001606698 us-gaap:CommonClassBMember 2020-06-30 0001606698 us-gaap:CommonClassCMember 2020-06-30 0001606698 us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0001606698 us-gaap:RetainedEarningsMember 2020-06-30 0001606698 us-gaap:SeriesBPreferredStockMember 2020-07-01 2020-09-30 0001606698 us-gaap:SeriesCPreferredStockMember 2020-07-01 2020-09-30 0001606698 us-gaap:SeriesDPreferredStockMember 2020-07-01 2020-09-30 0001606698 us-gaap:CommonClassAMember 2020-07-01 2020-09-30 0001606698 us-gaap:CommonClassBMember 2020-07-01 2020-09-30 0001606698 us-gaap:CommonClassCMember 2020-07-01 2020-09-30 0001606698 us-gaap:AdditionalPaidInCapitalMember 2020-07-01 2020-09-30 0001606698 us-gaap:RetainedEarningsMember 2020-07-01 2020-09-30 0001606698 2020-09-30 0001606698 us-gaap:SeriesBPreferredStockMember 2020-09-30 0001606698 us-gaap:SeriesCPreferredStockMember 2020-09-30 0001606698 us-gaap:SeriesDPreferredStockMember 2020-09-30 0001606698 us-gaap:CommonClassAMember 2020-09-30 0001606698 us-gaap:CommonClassBMember 2020-09-30 0001606698 us-gaap:CommonClassCMember 2020-09-30 0001606698 us-gaap:AdditionalPaidInCapitalMember 2020-09-30 0001606698 us-gaap:RetainedEarningsMember 2020-09-30 0001606698 fil:AccountsReceivableConcentrationRiskMember 2021-01-01 2021-09-30 0001606698 fil:AccountsReceivableConcentrationRiskMember 2020-01-01 2020-09-30 0001606698 fil:RevenuesConcentrationRiskMember 2021-01-01 2021-09-30 0001606698 fil:FinanceLeasesMember 2021-09-30 0001606698 fil:OperatingLeasesMember 2021-09-30 0001606698 srt:MinimumMember 2021-05-01 2021-07-31 0001606698 srt:MaximumMember 2021-05-01 2021-07-31 0001606698 2021-08-01 2021-09-30 0001606698 fil:LinesOfCreditMember 2021-09-30 0001606698 fil:LinesOfCreditMember 2020-12-31 0001606698 fil:EquipmentLoansMember 2021-09-30 0001606698 fil:EquipmentLoansMember 2020-12-31 0001606698 fil:PppEidlLoansMember 2021-09-30 0001606698 fil:PppEidlLoansMember 2020-12-31 0001606698 fil:ShortTermNotesMember 2021-09-30 0001606698 fil:ShortTermNotesMember 2020-12-31 0001606698 fil:EquipmentNoncurrentMember 2021-09-30 0001606698 fil:EquipmentNoncurrentMember 2020-12-31 0001606698 fil:SubordinatedSecuredPromissoryNote1Member 2019-11-30 0001606698 fil:SubordinatedSecuredPromissoryNote1Member 2019-11-01 2019-11-30 0001606698 fil:SubordinatedSecuredPromissoryNote2Member 2019-11-30 0001606698 fil:SubordinatedSecuredPromissoryNote2Member 2019-11-01 2019-11-30 0001606698 fil:SubordinatedSecuredPromissoryNote1Member 2021-04-08 0001606698 fil:NotesPayable1Member 2021-09-30 0001606698 fil:NotesPayable1Member 2020-12-31 0001606698 fil:NotesPayable2Member 2021-09-30 0001606698 fil:NotesPayable2Member 2020-12-31 0001606698 fil:ConvertibleNotesPayable1Member 2021-09-30 0001606698 fil:ConvertibleNotesPayable1Member 2020-12-31 0001606698 fil:ConvertibleNotesPayable2Member 2021-09-30 0001606698 fil:ConvertibleNotesPayable2Member 2020-12-31 0001606698 fil:ConvertibleNotesPayable3Member 2021-09-30 0001606698 fil:ConvertibleNotesPayable3Member 2020-12-31 0001606698 fil:ConvertibleNotesPayable4Member 2021-09-30 0001606698 fil:ConvertibleNotesPayable4Member 2020-12-31 0001606698 fil:ConvertibleNotesPayable5Member 2021-09-30 0001606698 fil:ConvertibleNotesPayable5Member 2020-12-31 0001606698 fil:JeffMossMember 2020-05-04 0001606698 fil:JeffMossMember 2021-01-01 2021-09-30 0001606698 fil:JeffMossMember 2021-12-31 0001606698 fil:JeffMossMember 2020-12-31 0001606698 fil:DwightHargreavesMember 2020-06-05 0001606698 fil:DwightHargreavesMember 2020-01-01 2020-09-30 0001606698 fil:DwightHargreavesMember 2021-12-31 0001606698 fil:DwightHargreavesMember 2021-09-30 0001606698 fil:DwightHargreavesMember 2020-12-31 0001606698 fil:PurchaseAgreementMember 2021-02-11 2021-02-11 0001606698 us-gaap:InvestorMemberus-gaap:CommonClassAMember 2021-01-01 2021-09-30 0001606698 us-gaap:InvestorMemberus-gaap:CommonClassCMember 2021-01-01 2021-09-30 0001606698 fil:TdiMemberus-gaap:CommonClassAMember 2021-01-01 2021-09-30 0001606698 fil:AltLabsMemberus-gaap:CommonClassAMember 2021-01-01 2021-09-30 0001606698 fil:RestrictedStockUnitsRsusMember 2021-01-01 2021-09-30 0001606698 fil:VayuUsMemberus-gaap:SeriesCPreferredStockMember 2021-01-01 2021-09-30 0001606698 fil:VayuUsMemberus-gaap:SeriesDPreferredStockMember 2021-01-01 2021-09-30 0001606698 fil:VayuUsMemberus-gaap:SeriesDPreferredStockMember 2021-09-30 0001606698 fil:EquityOptionMember 2020-12-31 0001606698 fil:EquityOptionMember 2020-01-01 2020-09-30 0001606698 fil:EquityOptionMember 2021-01-01 2021-09-30 0001606698 fil:EquityOptionMember 2021-09-30 0001606698 fil:StockOption1Member 2021-09-30 0001606698 fil:StockOption1Member 2021-01-01 2021-09-30 0001606698 fil:StockOption2Member 2021-09-30 0001606698 fil:StockOption2Member 2021-01-01 2021-09-30 0001606698 fil:StockOption3Member 2021-09-30 0001606698 fil:StockOption3Member 2021-01-01 2021-09-30 0001606698 fil:StockOption4Member 2021-09-30 0001606698 fil:StockOption4Member 2021-01-01 2021-09-30 0001606698 fil:StockOption5Member 2021-09-30 0001606698 fil:StockOption5Member 2021-01-01 2021-09-30 0001606698 fil:Warrant1Member 2020-12-31 0001606698 fil:Warrant1Member 2020-01-01 2020-12-31 0001606698 fil:Warrant1Member 2021-01-01 2021-09-30 0001606698 fil:Warrant1Member 2021-09-30 0001606698 fil:Warrant1Member 2021-01-01 2021-03-31 0001606698 fil:Warrant1Member 2021-03-31 0001606698 fil:Warrant2Member 2021-09-30 0001606698 fil:Warrant2Member 2021-01-01 2021-09-30 0001606698 fil:VayuUsMember 2021-01-01 2021-09-30 0001606698 fil:VayuUsMember 2021-09-30 0001606698 fil:TdiMember 2021-01-01 2021-09-30 0001606698 fil:BusinessAcquisitionAccountsReceivableMemberfil:TdiMember 2021-09-30 0001606698 fil:BusinessAcquisitionContractAssetMemberfil:TdiMember 2021-09-30 0001606698 fil:BusinessAcquisitionPropertyAndEquipmentMemberfil:TdiMember 2021-09-30 0001606698 fil:BusinessAcquisitionIntangibleAssetsMemberfil:TdiMember 2021-09-30 0001606698 fil:BusinessAcquisitionGoodwillMemberfil:TdiMember 2021-09-30 0001606698 fil:BusinessAcquisitionAccountsPayableMemberfil:TdiMember 2021-09-30 0001606698 fil:BusinessAcquisitionAccruedExpensesMemberfil:TdiMember 2021-09-30 0001606698 fil:BusinessAcquisitionContractLiabilityMemberfil:TdiMember 2021-09-30 0001606698 fil:BusinessAcquisitionNotesPayableMemberfil:TdiMember 2021-09-30 0001606698 fil:BusinessAcquisitionCashMemberfil:TdiMember 2021-01-01 2021-09-30 0001606698 fil:AltLabsMember 2021-01-01 2021-09-30 0001606698 fil:BusinessAcquisitionAccountsReceivableMemberfil:AltLabsMember 2021-09-30 0001606698 fil:BusinessAcquisitionInventoryMemberfil:AltLabsMember 2021-09-30 0001606698 fil:BusinessAcquisitionPropertyAndEquipmentMemberfil:AltLabsMember 2021-09-30 0001606698 fil:BusinessAcquisitionIntangibleAssetsMemberfil:AltLabsMember 2021-09-30 0001606698 fil:BusinessAcquisitionGoodwillMemberfil:AltLabsMember 2021-09-30 0001606698 fil:BusinessAcquisitionOtherAssetMemberfil:AltLabsMember 2021-09-30 0001606698 fil:BusinessAcquisitionAccountsPayableMemberfil:AltLabsMember 2021-09-30 0001606698 fil:BusinessAcquisitionAccruedExpensesMemberfil:AltLabsMember 2021-09-30 0001606698 fil:BusinessAcquisitionContractLiabilityMemberfil:AltLabsMember 2021-09-30 0001606698 fil:BusinessAcquisitionNotesPayableMemberfil:AltLabsMember 2021-09-30 0001606698 fil:BusinessAcquisitionCashMemberfil:AltLabsMember 2021-01-01 2021-09-30 0001606698 fil:AmplifeiintlLlcMember 2021-01-01 2021-09-30 0001606698 fil:BusinessAcquisitionAccountsReceivableConvertedMemberfil:AmplifeiintlLlcMember 2021-09-30 0001606698 fil:BusinessAcquisitionCashMemberfil:AmplifeiintlLlcMember 2021-09-30 0001606698 fil:ConstructionServicesMember 2021-01-01 2021-09-30 0001606698 fil:ConstructionServicesMember 2021-07-01 2021-09-30 0001606698 fil:ConstructionServicesMember 2020-07-01 2020-09-30 0001606698 fil:ConstructionServicesMember 2020-01-01 2020-09-30 0001606698 fil:ManufacturingMember 2021-01-01 2021-09-30 0001606698 fil:ManufacturingMember 2021-07-01 2021-09-30 0001606698 fil:ManufacturingMember 2020-07-01 2020-09-30 0001606698 fil:ManufacturingMember 2020-01-01 2020-09-30 0001606698 fil:DefenseMember 2021-01-01 2021-09-30 0001606698 fil:DefenseMember 2021-07-01 2021-09-30 0001606698 fil:DefenseMember 2020-07-01 2020-09-30 0001606698 fil:DefenseMember 2020-01-01 2020-09-30 0001606698 fil:AerospaceMember 2021-01-01 2021-09-30 0001606698 fil:AerospaceMember 2021-07-01 2021-09-30 0001606698 fil:AerospaceMember 2020-07-01 2020-09-30 0001606698 fil:AerospaceMember 2020-01-01 2020-09-30 0001606698 fil:UnallocatedMember 2021-01-01 2021-09-30 0001606698 fil:UnallocatedMember 2021-07-01 2021-09-30 0001606698 fil:UnallocatedMember 2020-07-01 2020-09-30 0001606698 fil:UnallocatedMember 2020-01-01 2020-09-30 0001606698 fil:ConstructionServicesMember 2021-09-30 0001606698 fil:ConstructionServicesMember 2020-12-31 0001606698 fil:ManufacturingMember 2021-09-30 0001606698 fil:ManufacturingMember 2020-12-31 0001606698 fil:AerospaceMember 2021-09-30 0001606698 fil:AerospaceMember 2020-12-31 0001606698 fil:DefenseMember 2021-09-30 0001606698 fil:DefenseMember 2020-12-31 0001606698 fil:UnallocatedMember 2021-09-30 0001606698 fil:UnallocatedMember 2020-12-31 xbrli:pure iso4217:USD xbrli:shares iso4217:USD xbrli:shares

 

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, 2021

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

 

Commission file number: 000-55205

 

PICTURE  

Alpine 4 Holdings, Inc.

(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: 480-702-2431

(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 1, 2021, the issuer had 149,609,780 shares of its Class A common stock issued and outstanding, 8,673,088 shares of its Class B common stock issued and outstanding and 12,500,200 shares of its Class C common stock issued and outstanding.


1


 

TABLE OF CONTENTS

 

PART I

 

Page

 

 

 

Item 1.

Financial Statements

4

 

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

22

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

 

 

 

Item 4.

Controls and Procedures

28

 

 

 

PART II

 

 

 

 

 

Item 1.

Legal Proceedings

28

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

 

 

 

Item 3.

Defaults Upon Senior Securities

30

 

 

 

Item 5.

Other Information

30

 

 

 

Item 6.

Exhibits

30

 

 

 

 

Signatures

32


2


 

 

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.


3


 

PART I - FINANCIAL INFORMATION

Item 1.Financial Statements. 

 

ALPINE 4 HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

September 30,

 

December 31,

 

 

 

 

2021

 

2020

 

 

 

 

 

(unaudited)

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

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

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)  

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY (DEFICIT):

 

 

 

 

 

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.


4


 

ALPINE 4 HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

 

 

 

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income tax

 

2,535,650

 

(1,399,862)

 

(6,721,095)

 

(3,712,388)

 

 

 

 

 

 

 

 

 

 

 

 

Income tax

 

 

54,058

 

-

 

54,058

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

$

2,481,592

$

(1,399,862)

$

(6,775,153)

$

(3,712,388)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic income (loss) per share

$

0.01

$

(0.01)

$

(0.04)

$

(0.03)

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income (loss) per share

$

0.01

$

(0.01)

$

(0.04)

$

(0.04)

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.


5


ALPINE 4 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
Stock

 

Class B Common
Stock

 

Class C Common
Stock

 

Additional
Paid-in

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

                                                                               

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

The accompanying notes are an integral part of these unaudited consolidated financial statements.


6



ALPINE 4 HOLDINGS, INC. AND SUBSIDIARIES

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.


7



Alpine 4 Holdings, Inc., and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

For the Nine Months Ended September 30, 2021

 

Note 1 – Organization and Basis of Presentation

 

The unaudited consolidated financial statements were prepared by Alpine 4 Holdings, 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 15, 2021. The results for the nine months ended September 30, 2021, are not necessarily indicative of the results to be expected for the year ending December 31, 2021.

 

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 was a holding company owning, directly or indirectly, eleven companies:

 

·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); 

·Thermal Dynamics, Inc.; 

·Alternative Laboratories, LLC.; and 

·Identified Technologies Corporation. 

 


8



Basis of presentation

 

The accompanying consolidated financial statements present the balance sheets, statements of operations, stockholders' deficit and cash flows of the Company. The financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).

 

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 statements 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 had approximately $3.5 million in cash. During the nine months ended September 30, 2021, the Company paid down liabilities of approximately $13.1 million. In addition, approximately $7.2 million was used to build inventory and for capital expenditures.

 

However, there is no assurance that management’s plans will be successful due to the current economic climate in the United States and globally.

 

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, 2021 and December 31, 2020.  Significant intercompany balances and transactions have been eliminated.

 

Use of estimates

 

The consolidated financial statements are prepared in accordance with U.S. GAAP.  Preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable. In many instances, the Company could have reasonably used different accounting estimates and in other instances changes in the accounting estimates are reasonably likely to occur from period to period. This applies in particular to useful lives of long-lived assets, valuation allowance for deferred tax assets and impairment of long-lived assets. Actual results could differ significantly from our estimates. To the extent that there are material differences between these estimates and actual results, the Company’s future financial


9



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 on the Company’s financial results during 2021 and beyond.  COVID-19 did have a negative impact on the Company’s financial performance in 2020.  During the nine months ended September 30, 2021, there was no impairment charge related to intangible assets and goodwill.

 

Cash and Restricted Cash

 

Cash and cash equivalents consist of cash and short-term investments with original maturities of less than 90 days. As of September 30, 2021, and December 31, 2020, the Company had no cash equivalents. As of September 30, 2021, and December 31, 2020, the Company had $0 and $444,845 in restricted cash, respectively, for amounts held in escrow.

 

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.

 

 

 

September 30,

 

 

December 31,

 

2021

 

 

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 16% and 18%, respectively, of accounts receivable as of September 30, 2021. The Company had two customers that made up 10% and 8%, respectively, of accounts receivable as of December 31, 2020.

 

For the nine months ended September 30, 2021 and 2020, the Company had one customer that made up 13% and 10% of total revenues, respectively.

 

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 the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

 

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 or liabilities.

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

 

The Company's financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, convertible notes, notes payable and lines 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.

 

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 December 31, 2020, the Company had no financial assets or liabilities that were required to be fair valued on a recurring basis.

 

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 there 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.


10



 

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 minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

 

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 shares

 

The Company presents both basic and diluted net income (loss) per share on the face of the consolidated statements of operations. Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted per share calculations give effect to all potentially dilutive shares of common stock outstanding during the period, including stock options and warrants, and using the treasury-stock method. If antidilutive, the effect of potentially dilutive shares of common stock is ignored. The only potentially dilutive securities outstanding during the periods presented were the convertible debt, options and warrants.  The following table illustrates the computation of basic and diluted earnings per share (“EPS”) for the three and nine months ended September 30, 2021 and 2020:

 

 

 

For the Three Months Ended September 30, 2021

 

For the Three Months Ended September 30, 2020

 

 

Net Income

 

Shares

 

Per Share Amount

 

 

Net loss

 

Shares

 

Per Share Amount

Basic EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

2,481,592

 

166,964,408

$

0.01

 

$

(1,399,862)

 

131,934,084

$

(0.01)

Effect of Dilutive Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options and warrants

 

-

 

1,663,499

 

-

 

 

-

 

-

 

-

Dilute EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) plus

 

 

 

 

 

 

 

 

 

 

 

 

 

assumed conversions

$

2,481,592

 

168,627,907

$

0.01

 

$

(1,399,862)

 

131,934,084

$

(0.01)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended September 30, 2021

 

For the Nine Months Ended September 30, 2020

 

 

Net loss

 

Shares

 

Per Share Amount

 

 

Net loss

 

Shares

 

Per Share Amount

Basic EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(6,775,153)

 

161,118,324

$

(0.04)

 

$

(3,712,388)

 

130,111,673

$

(0.03)

Effect of Dilutive Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible debt

 

-

 

-

 

-

 

 

(1,557,294)

 

8,126,877

 

(0.01)

Dilute EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss plus

 

 

 

 

 

 

 

 

 

 

 

 

 

assumed conversions

$

(6,775,153)

 

161,118,324

$

(0.04)

 

$

(5,269,682)

 

138,238,550

$

(0.04)


11



Note 3 – Leases

 

The Company determines whether a contract 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 uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company must discount lease payments based on an estimate of its incremental borrowing rate.

 

As of September 30, 2021, the future minimum finance and operating lease payments were as follows:

 

 

 

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, 2021. As a result of this amendment, the Company remeasured the finance lease liability and recorded an additional $279,287 to the related asset and finance lease liability on the date of the modification.

 

Operating Leases

 

The table below presents the lease related assets and liabilities recorded on the Company’s consolidated balance sheets as of September 30, 2021, and December 31, 2020:

 

 

 

 

 

September 30,

 

December 31,

 

 

Classification on Balance Sheet

 

2021

 

2020

Assets

 

 

 

 

 

 

 Operating lease assets

Operating lease right of use assets

$

347,712

$

581,311

Total lease assets

 

 

$

347,712

$

581,311

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 Operating lease liability

Current operating lease liability

$

135,207

$

334,500

Noncurrent liabilities

 

 

 

 

 

 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 lease 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 end of the term. The Company determined the lease to be an operating lease and recognized a right-of-use asset and operating lease liability of $3,689,634 based on the present value of the minimum lease payments discounted using an incremental borrowing rate of 3.96%. This lease was terminated on August 27, 2021, when the Company purchased the building.

 

At September 30, 2021 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.


12



Note 4 – Notes Payable and Line of Credit

 

The outstanding balances for the loans as of September 30, 2021, and December 31, 2020, were as follows:

 

 

September 30,

 

 

December 31,

 

 

2021

 

 

2020

Lines of credit, current portion

$

3,718,972

 

$

2,819,793

Equipment loans, current portion

 

63,531

 

 

245,388

PPP loans

 

278,867

 

 

-

Term notes, current portion

 

5,468,843

 

 

4,035,730

Total current

 

9,530,213

 

 

7,100,911

PPP/EIDL loans

 

877,083

 

 

4,340,956

Long-term portion of equipment loans and term notes

 

6,645,379

 

 

10,860,494

Total notes payable and line of Credit

$

17,052,675

 

$

22,302,361

 

Future scheduled maturities of outstanding notes payable are as follows:

 

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, 2021, the Company received forgiveness on nine loans under the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. The Company recognized 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 debt conversion agreement with the 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 seller for the same number of shares of the Company’s Class A common stock. The Company recognized a gain on extinguishment of debt totaling $803,079 during the nine months ended September 30, 2021, as a result of the settlement of the note.

 

In August 2020, the company filed 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 three revolving lines of credit totaling $8.3 million and two capital expenditures lines of credit totaling $1.0 million. The revolving lines of credit used as of September 30, 2021, totaled $3.7 million with an interest rate ranging from prime plus 2.50% - 4.25% and a term of one year. As of September 30, 2021, the Company had $5.6 in additional funds available to borrow.

 

On August 27, 2021 the Company entered into $4.7 million agreement for the purchase of a building located at 4740 Cleveland in Ft. Myers, Florida. The loan bears interest at a rate of 3.95% per annum for a term of 10 years and requires monthly payments of $24,574. The loan is secured by the building and a guarantee by the Company. As of September 30, 2021, there were no payments made for this loan as the initial payment was due in October 2021, and subsequent payments are due by the 27th of each month. As of the date of this Report, the Company was current with this obligation.

 


13



Note 5 – Notes Payable, Related Parties

 

At September 30, 2021, and December 31, 2020, notes payable due to related parties consisted of the following:

 

 

 

September 30,

 

 

December 31,

 

2021

 

 

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, 2021. These notes were due on demand by the lenders as of the date of this Report.

 

Note 6 – Convertible Notes Payable

 

At September 30, 2021, and December 31, 2020, convertible notes payable consisted of the following:

 

 

 

 

September 30,

 

 

December 31,

 

 

2021

 

 

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.   


14



 

A loss on extinguishment of debt of $192,272 was recognized on these transactions in June 2020.   

 

During the nine months ended September 30, 2021, and the year ended December 31, 2020, the Company issued convertible notes with fixed conversion prices.  The Company recognized a beneficial conversion feature related to these convertible notes amounting to $92,428 and $1,482,500 for the nine months ended September 30, 2021, and the year ended December 31, 2020, respectively, as a debt discount to the convertible notes and as a component of equity.  The discounts are being amortized over the terms of the convertible notes payable.  Amortization of debt discounts during the nine months ended September 30, 2021 and 2020, amounted to $1,436,052 and $507,534, respectively, and is recorded as interest expense in the accompanying consolidated statements of operations.  There was no remaining unamortized discount balance for these notes as of September 30, 2021.

 

A summary of the activity in the Company's convertible notes payable is provided below:

 

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 7 – Stockholders' Equity

 

Common Stock

 

The Company had the following transactions in its common stock during the nine months ended September 30, 2021:

 

·On February 11, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain investors to purchase 8,333,333 shares of the Company’s Class A common stock for aggregate gross proceeds of approximately $50 million.  A.G.P./Alliance Global Partners served as the placement agent and received a cash fee of 7% of the aggregate gross proceeds and warrants to purchase shares of the Company’s Class A Common Stock equal to 5% of the number of shares sold in the offering with an exercise price of $6.60 per share and are not exercisable until August 16, 2021. Net proceeds from the sale of shares amounted to approximately $45 million.  

·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, 2021, the Company issued 7,384,018 shares of Class A common stock for the conversion of total debt and accrued liabilities totaling $1,886,898.   

·On March 17, 2021, the Company repurchased 45,000 shares of Class C common stock for $185,850.  

·On May 5, 2021, the Company issued 281,223 shares of Class A common stock that were valued at $1,102,394 in connection with the acquisition of TDI. 

·On May 10, 2021, the Company issued 361,787 shares of Class A common stock that were valued at $1,432,677 in connection with the acquisition of Alt Labs. 

·On April 30, 2021, the Company issued 1,617,067 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 Class C common stock. 

·On May 17, 2021, the Company 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 holder of the Class B common stock. 

 

Preferred Stock

 

·On February 8, 2021, the Company issued 1,432,244 shares of Series D Preferred Stock in connection with the acquisition of assets of Vayu that were valued at $6,653,309.  

·In March 2021, the Company repurchased 514,286 outstanding restricted stock units (RSUs) which had 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 individuals in connection with the IA and Vayu acquisitions. 


15



 

Stock Options

 

The following summarizes the stock option activity for the nine months ended September 30, 2021:

 

 

 

 

 

 

 

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 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, 2021 and 2020, stock option expense amounted to $31,933 and $58,887, respectively. Unrecognized stock option expense as of September 30, 2021, amounted to $11,815, which will be recognized over a period extending through December 2022.    

 

Warrants

 

The following summarizes the warrants activity for the nine months ended September 30, 2021:

 

 

 

 

 

 

 

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

-

 

$

-

 

-

 

$

-

 


16



 

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.

 

Note 8 – Business Combinations

 

Vayu (US)

 

Effective February 8, 2021, the Company 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 which there were none. The cost is allocated to the group of assets acquired based on their relative fair values. The assets acquired and liabilities assumed were as follows at the acquisition date:

 

 

 

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 as follows:

 

Series D Preferred Stock

$

6,653,309

 

$

6,653,309

 


17



 

TDI

 

On May 5, 2021, the Company closed on the acquisition of Thermal Dynamics, Inc., a Delaware corporation. This acquisition was considered an acquisition of a business under ASC 805. A summary of the purchase price allocation at fair value is below. The business combination accounting is not yet complete and the amounts assigned to assets acquired and liabilities assumed are provisional. Therefore, this may result in future adjustments to the provisional amounts as information is obtained about facts and circumstances that existed at the acquisition date.

 

 

 

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 closed on the acquisition of Alternative Laboratories, LLC., a Delaware limited liability company. This acquisition was considered an acquisition of a business under ASC 805. A summary of the purchase price allocation at fair value is below. The business combination accounting is not yet complete and the amounts assigned to assets acquired and liabilities assumed are provisional. Therefore, this may result in future adjustments to the provisional amounts as information is obtained about facts and circumstances that existed at the acquisition date.

 

 

 

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 agreement 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 upon closing. The Company closed on the purchase of the building in August 2021.

 


18



 

The following are the unaudited pro forma results of operations for the nine months ended September 30, 2021 and 2020, as if Excel, Impossible Aerospace, Inc. (“IA”), Vayu, TDI, and Alt Labs had been acquired on January 1, 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.

 

 

 

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 Company 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, 2021, the Company determined there was no impairment.

 

The membership interest was paid for as follows:    

 

Accounts receivable converted

$

1,000,000

Cash

 

350,000

Total

$

1,350,000

 

Note 10 – Segment Reporting

 

The Company discloses segment information that is consistent with the way in which management operates and views its business.  Effective during the quarter ended September 30, 2021, the Company has reduced its reportable segments to four operating segments as represented by the Company’s four silos: A4 Construction Services, Inc.; A4 Manufacturing, Inc.; A4 Aerospace Corporation; and A4 Defense Systems, Inc.  The Company’s reportable segments for the three and nine months ended September 30, 2021, and September 30, 2020, and as of September 30, 2021 and December 31, 2020:

 

 

 

 

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)


19



 

$

(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


20



Note 11 – Commitments and Contingencies

 

Legal Proceedings

 

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 inherent 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, except as set forth below.

 

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 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 C Preferred Stock and 1,432,244 shares of Series D Preferred Stock into Class A Common Stock, pursuant to the respective Certificates of Designation of the Series 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 shareholders 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 the SPA, the Buyer purchased all of the outstanding shares of capital stock of the Target, a total of 6,486,044 shares of the Target’s capital stock (the “Target Shares”). The total purchase price for the Target Shares was $4,000,000 and was paid in shares of the Company’s Class A common stock (the “Company Shares”), issued to the Shareholders. Following the closing of the transaction, the Buyer owned 100% of the capital stock of the Target. The acquisition of the Target closed on October 20, 2021.

 

A total of 888,881 shares of restricted Class A common stock with a fair value of approximately $3.6 million were issued to the 13 Shareholders, together with an aggregate of $35.47 in cash (to avoid the issuance of fractional shares). Pursuant to the SPA, the Shareholders were limited to being able to sell 33% of their shares every 90 days once the Shares were no longer restricted pursuant to Rule 144.


21



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 and our 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 that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language at the beginning of this Quarterly Report regarding forward-looking statements.

 

Overview and Highlights

 

Company Background

 

Alpine 4 Holdings, Inc. (“we,” “our,” or the “Company”), was incorporated under the laws of the State of Delaware on April 22, 2014. We are a publicly traded conglomerate that is acquiring businesses that fit into its disruptive DSF business model of Drivers, Stabilizers, and Facilitators.   At Alpine 4, we understand the nature of how technology and innovation can accentuate a business.  Our focus is on how the adaptation of new technologies even in brick and mortar businesses can drive innovation.   We also believe that our holdings should benefit synergistically from each other and that the ability to have collaboration across varying industries can spawn new ideas and create fertile ground for competitive advantages.  This unique perspective has culminated in the development of our Blockchain-enabled Enterprise Business Operating System called SPECTRUMebos.

 

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 the 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 more harmonious relationship between the two companies. The combining of resources should empower Morris to strengthen its brand through its strategic banking relationship, eliminate duplicative and competitive interests, and expand its footprint beyond the Indiana home base.

 

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.


22



On October 20, 2021, the Company acquired 100% of the outstanding shares of Identified Technologies Corporation, a Delaware corporation (“Identified Technologies”).

 

Alpine 4 maintains 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 his “Federalist paper #11”, said that our adventurous spirit distinguishes the commercial character of America.  Hamilton knew that our freedom to be creative gave American businesses a competitive advantage over the rest of the world.  We believe that Alpine 4 also exemplifies this spirit in our subsidiaries and that our greatest competitive advantage is our highly diverse business structure combined with a culture of collaboration.

 

It is our mandate to grow 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 sister 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 collaborative business culture, that helps drive out competition in our markets by bringing; resources, planning, technology and capacity that our competitors 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.


23



PICTURE  

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 the company we are buying.  Those three major points are what we call the “What is, 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 old 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 finally, the subsidiaries they manage must have posted a net profit for 3 consecutive months.


24



Results of Operations

 

The following are the results of our operations for the 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 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 for the three months ended September 30, 2021, increased by $5,559,774 as compared to the three months ended September 30, 2020. In 2021, the increase in cost of revenue is related to the acquisition of TDI and Alt Labs. Cost of revenue also increased related to increased revenues for QCA and Morris. The net result of the increase in our cost of revenue dollars in comparison to our revenue was an increase in our gross profit percentage from 15.34% in the third quarter 2020 to 25.56% in the third quarter 2021.

 

Operating expenses

 

Our operating expenses for the three months ended September 30, 2021, increased by $4,209,318 as compared to the three months ended September 30, 2020. The increase is due to the acquisitions of TDI and Alt Labs. During 2021 the Company has been building its corporate infrastructure and adding additional executives and new staff in various areas, including accounting, software development, and engineering to handle future growth at the subsidiary level.


25



Other income (expenses)

 

Other income for the three months ended September 30, 2021, increased by $5,035,921 as compared to the same period in 2020. This increase was primarily due to forgiveness of the Paycheck Protection Program (“PPP”) Loans.

 

The following are the results of our operations for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020.

 

 

 

 

 

 

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

 


(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 nine months ended September 30, 2021, the Company had several one-time / non-recurring items included in the $6,775,153 net loss.  These non-recurring items totaled $3,613,435, consisting of $350,000 in new acquisitions expenses captured in professional fees, and other costs, $1,827,383 for repurchase of RSUs, and $1,436,052 in amortization for note discounts.

 

Revenue

 

Our revenues for the nine months ended September 30, 2021, increased by $13,330,492 as compared to the nine months ended September 30, 2020.  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 for the nine months ended September 30, 2021, increased by $9,218,664 as compared to the nine months ended September 30, 2020. In 2021, the increase in cost of revenue is related to the acquisition of TDI and Alt Labs. Cost of revenue also increased related to increased revenues for QCA and Morris. The net result of the increase in our cost of revenue dollars in comparison to our revenue was an increase in our gross profit percentage from 18.99% in the first nine months of 2020 to 22.95% in the first nine months of 2021. 


26



Operating expenses

 

Our operating expenses for the nine months ended September 30, 2021, increased by $10,478,681 as compared to the nine months ended September 30, 2020.  The increase is due to the acquisitions 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 connection with the acquisitions of Impossible Aerospace and Vayu of $1,100,451 and $726,932, respectively.

 

Other income (expenses)

 

Other income for the nine months ended September 30, 2021, increased by $3,358,146 as compared to the same period in 2020. This increase was primarily due to the forgiveness of PPP Loans.

 

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 or debt instruments. In the first quarter of 2021, we raised approximately $54,000,000 through the sale of our common stock.

 

In April and May 2020, we received seven loans under the Paycheck Protection Program of the U.S. Coronavirus Aid, Relief and Economic Security (“CARES”) Act totaling $3,896,107.  During the nine 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 at 1% per annum. We expect some or all of these loans to be forgiven as provided by in the CARES Act. nine loans totaling $4,896,573 were forgiven during the nine months ended September 30, 2021.

 

Management expects to have sufficient working capital for continuing operations from either the sale of its products or through the raising of additional capital through private offerings of our 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, the Company is monitoring additional businesses to acquire which management hopes 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.

 

The Company also may elect to seek additional bank financing, engage in debt financing through a placement agent, or sell shares of its common stock in public or private offering transactions. 

 

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 are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. Preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable. In many instances, we could have reasonably used different accounting estimates and in other instances changes in the accounting estimates are reasonably likely to occur from period to period. This applies in particular to useful lives of non-current assets and valuation allowance for deferred tax assets. Actual results could differ significantly from our estimates. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. Management believes that there have been no changes in our critical accounting policies during the nine months ended September 30, 2021. 

 

For a summary of our critical accounting policies, refer to Note 2 of our consolidated financial statements included under Item 8 – Financial Statements in our Annual Report on Form 10-K filed on April 15, 2021.

 


27



Item 3. Quantitative and Qualitative Disclosures About Market Risk. 

 

As a Smaller Reporting Company, the Company is not required to include the disclosure under this Item.

 

Item 4. Controls and Procedures.

 

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, September 30, 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, 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 over financial reporting. However, as discussed in our Annual Report for the year ended December 31, 2020, we have hired additional qualified accounting personnel, including a Corporate Controller. We have continued to address and mitigate these material weaknesses through the implementation and testing of controls and ensure that controls that are properly designed are adequately performed to appropriately address risk related to critical functionality. Management will continue to work to improve the Company’s disclosure controls and procedures throughout 2021 and we believe that we have made significant progress in a short period of time. Management will continue to work to improve the Company’s disclosure controls and procedures throughout 2021, with a goal of remediating the material weaknesses no later than December 31, 2022. We believe that we have made significant progress.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2021, that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1.   Legal Proceedings.

 

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 inherent 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.


28



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 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 exacerbated 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 variants 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 uncertain, but could potentially impact our future sales, manufacturing operations and financial 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 reflected 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 COVID-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 adversely impacted by the COVID-19 pandemic and its negative effects on global economic conditions.

 

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

 

Issuances in 2021

 

In January 2021, the Company 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, 2021, the Company issued an aggregate of 7,384,018 shares of its restricted Class A common stock for convertible debt of $1,886,898 from 2020.


29



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 the TDI acquisition.

 

The shares of 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 the rules and regulations promulgated thereunder.

 

In May 2021, the Company issued 361,787 shares of 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 conversion of shares of Class C common stock by the holder of the Class C common stock.

 

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 3.  Defaults Upon Senior Securities.

 

None

 

Item 5.  Other Information

 

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 Designation (incorporated by reference to Exhibit 3.4 to Alpine 4’s Current Report on Form 8-K filed November 17, 2020).

 

 

 

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 January 4, 2021).

 

 

 


30



3.3

 

Certificate of Amendment to Certificate of Incorporation (Name Change) filed February 5, 2021 (incorporated by reference to Exhibit 3.4 to Alpine 4’s Current Report on Form 8-K filed February 8, 2021).

 

 

 

10.1

 

Impossible Aerospace Consultant Agreement dated November 13, 2020 (incorporated by reference to Exhibit 10.1 to Alpine 4’s Current Report on Form 8-K filed November 17, 2020).

 

 

 

10.2

 

RSU Agreement dated November 13, 2020 (incorporated by reference to Exhibit 10.2 to Alpine 4’s Current Report on Form 8-K filed November 17, 2020).

 

 

 

10.3

 

Vayu (US) Employment Agreement dated December 29, 2020 (incorporated by reference to Exhibit 10.1 to Alpine 4’s Current Report on Form 8-K filed January 4, 2021).

 

 

 

10.4

 

RSU Agreement dated December 29, 2020 (incorporated by reference to Exhibit 10.2 to Alpine 4’s Current Report on Form 8-K filed January 4, 2021).

 

 

 

10.5

 

Form of Securities Purchase Agreement (AGP Transaction) (incorporated by reference to Exhibit 10.1 to Alpine 4’s Current Report on Form 8-K filed February 12, 2021).

 

 

 

10.6

 

Form of Placement Agent Agreement (incorporated by reference to Exhibit 10.2 to Alpine 4’s Current Report on Form 8-K filed February 12, 2021).

 

 

 

10.7

 

Stock Purchase Agreement by and among A4 Defense Services, Inc., Thermal Dynamics International, Inc., Page Management Co., Inc., and Stephen L. Page (previously filed as Exhibit 10.1 to the Company’s Current Report filed on May 4, 2021, and incorporated herein by reference).

 

 

 

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

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

31.2

 

Certification of Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

32.1

 

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

32.2

 

Certification of Chief Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

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*

 

*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.


31



 

SIGNATURES

 

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 Holdings, Inc.

 

 

 

Dated: November 4, 2021

 

 

 

 

 

 

 

 

 

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

Alpine 4 (NASDAQ:ALPP)
Historical Stock Chart
From Jul 2022 to Aug 2022 Click Here for more Alpine 4 Charts.
Alpine 4 (NASDAQ:ALPP)
Historical Stock Chart
From Aug 2021 to Aug 2022 Click Here for more Alpine 4 Charts.