U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
Commission file number:
(Exact name of registrant as specified in its charter)
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
| |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant's telephone number, including area code:
(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.
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).
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 | ☐ |
☒ |
| Smaller reporting company | ||
Emerging growth company |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
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 August 4, 2021, the issuer had
1
TABLE OF CONTENTS
PART I |
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Management's Discussion and Analysis of Financial Condition and Results of Operations | 21 | |
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2
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements and information in this Quarterly Report on Form 10-Q for the quarter ended June 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 | |||||||
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| December 31, |
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ASSETS |
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CURRENT ASSETS: |
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| Cash |
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| Restricted cash |
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| Accounts receivable, net |
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| Contract assets |
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| Inventory, net |
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| Prepaid expenses and other current assets |
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| Total current assets |
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Property and equipment, net |
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Intangible asset, net |
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Right of use assets, net |
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Goodwill |
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Other non-current assets |
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| TOTAL ASSETS | $ | $ | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
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CURRENT LIABILITIES: |
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| Accounts payable | $ | $ | ||||
| Accrued expenses |
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| Contract liabilities |
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| Notes payable, current portion |
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| Notes payable, related parties |
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| Convertible notes payable, current portion, net of discount of $0 and $1,343,624 |
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| Financing lease obligation, current portion |
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| Operating lease obligation, current portion |
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| Total current liabilities |
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Notes payable, net of current portion |
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Convertible notes payable, net of current portion |
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Financing lease obligations, net of current portion |
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Operating lease obligations, net of current portion |
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Deferred tax liability |
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| TOTAL LIABILITIES |
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STOCKHOLDERS' EQUITY (DEFICIT): |
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| Preferred stock, $ |
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| Series B preferred stock; $ |
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| Series C preferred stock; $ |
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| Series D preferred stock; $ |
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| Class A Common stock, $ |
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| Class B Common stock, $ |
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| Class C Common stock, $ |
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| Additional paid-in capital |
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| Accumulated deficit |
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| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ | $ |
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) | |||||||||||
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| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||
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Revenue |
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Cost of revenue |
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Gross Profit |
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Operating expenses: |
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| General and administrative expenses |
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| Impairment loss of intangible assets and goodwill |
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| Research and development |
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| Total operating expenses |
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Loss from operations |
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Other income (expenses) |
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| Interest expense |
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| Change in value of derivative liability |
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| Gain (loss) on extinguishment of debt |
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| Gain on forgiveness of debt |
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| Change in fair value of contingent consideration |
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| Other income |
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| Total other income (expenses) |
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Loss before income tax |
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Income tax (benefit) |
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Net loss |
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Weighted average shares outstanding: |
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| Diluted |
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Basic loss per share | $ | ( | $ | ( | $ | ( | $ | ( | |||
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Diluted loss per share | $ | ( | $ | ( | $ | ( | $ | ( | |||
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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) | ||||||||||||||||||||||||||||||||
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| 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 |
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| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | |||
Balance, December 31, 2020 |
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Issuance of shares of common stock for cash, net of offering costs |
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Issuance of shares of common stock for convertible note payable and accrued interest |
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Issuance of shares of series D preferred stock for acquisition |
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Repurchase of class C common stock |
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Share-based compensation expense |
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Beneficial conversion feature on convertible notes |
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Net loss |
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Balance, March 31, 2021 |
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Issuance of shares of common stock for acquisitions |
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Issuance of shares of common stock for convertible note payable and accrued interest |
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Conversion of Class C to Class A |
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Conversion of Class B to Class A |
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Share-based compensation expense |
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Net loss |
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Balance, June 30, 2021 |
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Balance, December 31, 2019 |
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Issuance of shares of common stock for cash |
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Issuance of shares of common stock for convertible note payable and accrued interest |
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Issuance of shares of common stock for debt settlement |
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Issuance of shares of common stock for penalty |
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Issuance of shares of common stock for compensation |
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Issuance of shares of series B preferred stock |
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Share-based compensation expense |
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Net income |
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Balance, March 31, 2020 |
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Share-based compensation expense |
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Net loss |
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Balance, June 30, 2020 |
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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) | ||||||||
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| Six Months Ended June 30, | ||
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| 2021 |
| 2020 | |
OPERATING ACTIVITIES: |
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| Net loss |
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| Adjustments to reconcile net loss to |
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| net cash used in operating activities: |
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| Depreciation and amortization |
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| Change in fair value of contingent consideration |
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| Stock issued for penalties |
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| Employee stock compensation |
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| Amortization of debt discounts |
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| Non-cash lease expense |
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| Impairment loss of intangible asset and goodwill |
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| Change in current assets and liabilities: |
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| Accounts receivable |
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| Inventory |
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| Prepaid expenses and other assets |
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| Accounts payable |
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| Accrued expenses |
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| Contract liabilities |
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| Operating lease liability |
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| Deposits |
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| Net cash used in operating activities |
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INVESTING ACTIVITIES: |
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| Capital expenditures |
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FINANCING ACTIVITIES: |
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| Proceeds from the sale of common stock, net of offering costs |
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| Proceeds from issuances of convertible notes payable |
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| Proceeds from financing lease |
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| Repurchase of common stock |
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| Repayments of notes payable, related party |
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| Repayments of notes payable, non-related parties |
| ( |
| ( | ||
|
| Repayments of convertible notes payable |
| ( |
| ( | ||
|
| Repayment of line of credit |
| ( |
| ( | ||
|
| Cash paid on financing lease obligations |
| ( |
| ( | ||
| Net cash provided by financing activities |
|
| |||||
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND RESTRICTED CASH |
|
| ||||||
|
|
|
|
|
|
|
|
|
CASH AND RESTRICTED CASH, BEGINNING BALANCE |
|
| ||||||
|
|
|
|
|
|
|
|
|
CASH AND RESTRICTED CASH, ENDING BALANCE | $ | $ | ||||||
|
|
|
|
|
|
|
|
|
CASH PAID FOR: |
|
|
|
|
| |||
| Interest |
| $ | $ | ||||
| Income taxes |
| $ | $ | ||||
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING: |
|
| ||||||
| Penalty interest added to debt | $ | | $ | ||||
| Common stock issued for convertible note payable and accrued interest | $ | $ | |||||
| Common stock issued for debt settlement | $ | $ | |||||
| Issuance of note payable for acquisition | $ | $ | |||||
| Common stock issued for acquisition | $ | $ | |||||
| Common stock issued to settle unpaid salaries | $ | $ | |||||
| ROU asset and operating lease obligation recognized under Topic 842 | $ | $ | |||||
| Remeasurement of finance lease liability | $ | $ | |||||
| Equipment purchased on financing lease | $ | $ | |||||
| Other asset reclassified to fixed asset | $ | $ | |||||
| Issuance of shares of series D preferred stock for acquisition | $ | $ | |||||
| Beneficial conversion feature on convertible notes | $ | $ |
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 Six Months Ended June 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 six months ended June 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 January 1, 2019, the Company purchased all of the outstanding capital stock of Morris Sheet Metal Corp., an Indiana corporation (“MSM”), JTD Spiral, Inc. a wholly owned subsidiary of MSM, an Indiana corporation, 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”).
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.;
·Impossible Aerospace, Inc.;
·Vayu (US);
·Thermal Dynamics, Inc.; and
·Alternative Laboratories, LLC.
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 six months ended June 30, 2021, of $9.3 million, and had a negative cash flow used in operations, there were significant non-recurring items related to the RSU purchases totaling approximately $1.8 million contributing to the loss.
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 plans to continue to generate additional revenue (and improve cash flows from operations) partly from the acquisitions of two operating companies which closed in May 2021 combined with improved 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 June 30, 2021, quarter with $10.5 million in cash and $1.4 million in restricted cash after the purchase of the two operating companies in May 2021. As of the date of this Report, the Company had $7.1 million in cash and $1.4 million in restricted cash. During the six months ended June 30, 2021, the Company paid down liabilities of approximately $13.0 million. In addition, approximately $3.0 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 June 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 statement presentation, financial condition, results of operations
9
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 six months ended June 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 June 30, 2021, and December 31, 2020, the Company had no cash equivalents. As of June 30, 2021, and December 31, 2020, the Company had $1,400,000 and $444,845 in restricted cash, respectively, for amounts held in escrow. The $1,400,000 held in escrow as of June 30, 2021 was for the purchase of the building located at 4740 Cleveland Ft. Myers, FL, for Alt Labs (see Note 8).
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.
|
| June 30, |
|
| December 31, |
| 2021 |
|
| 2020 | |
Cash | $ |
| $ | ||
Restricted cash |
|
|
| ||
Total cash and restricted cash shown in statement of cash flows | $ |
| $ |
Major Customers
For the six months ended June 30, 2021 and 2020,
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.
10
The carrying value of long-term debt approximates fair value since the related rates of interest approximate current market rates. As of June 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.
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 six months ended June 30, 2021, research and development cost totaled $515,202.
Earnings (loss) per shares
The Company presents both basic and diluted net loss per share on the face of the consolidated statements of operations. Basic net loss per share is computed by dividing net 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 six months ended June 30, 2021 and 2020:
|
| For the Three Months Ended June 30, 2021 |
| For the Three Months Ended June 30, 2020 | |||||||||
|
| Net loss |
| Shares |
| Per Share Amount |
|
| Net loss |
| Shares |
| Per Share Amount |
Basic EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss | $ | ( |
| $ | ( |
| $ | ( |
| $ | ( | ||
Effect of Dilutive Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt |
| - |
| - |
| - |
|
| - |
| - |
| - |
Dilute EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss plus |
|
|
|
|
|
|
|
|
|
|
|
|
|
assumed conversions | $ | ( |
| $ | ( |
| $ | ( |
| $ | ( | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Six Months Ended June 30, 2021 |
| For the Six Months Ended June 30, 2020 | |||||||||
|
| Net loss |
| Shares |
| Per Share Amount |
|
| Net loss |
| Shares |
| Per Share Amount |
Basic EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss | $ | ( |
| $ | ( |
| $ | ( |
| $ | ( | ||
Effect of Dilutive Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt |
| - |
| - |
| - |
|
| ( |
|
| - | |
Dilute EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss plus |
|
|
|
|
|
|
|
|
|
|
|
|
|
assumed conversions | $ | ( |
| $ | ( |
| $ | ( |
| $ | ( |
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.
11
As of June 30, 2021, the future minimum finance and operating lease payments were as follows:
|
| Finance |
| Operating |
Twelve Months Ending June 30, |
| Leases |
| Leases |
2022 | $ | $ | ||
2023 |
|
| ||
2024 |
|
| ||
2025 |
|
| ||
2026 |
|
| ||
Thereafter |
|
| ||
Total payments |
|
| ||
Less: imputed interest |
| ( |
| ( |
Total obligation |
|
| ||
Less: current portion |
| ( |
| ( |
Non-current financing leases obligations | $ | $ |
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 June 30, 2021, and December 31, 2020:
|
|
|
| June 30, |
| December 31, |
|
| Classification on Balance Sheet |
| 2021 |
| 2020 |
Assets |
|
|
|
|
|
|
Operating lease assets | Operating lease right of use assets | $ | $ | |||
Total lease assets |
|
| $ | 4,060,920 | $ | 581,311 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Operating lease liability | Current operating lease liability | $ | $ | |||
Noncurrent liabilities |
|
|
|
|
| |
Operating lease liability | Long-term operating lease liability |
|
| |||
Total lease liability |
| $ | $ |
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%.
At June 30, 2021 and December 31, 2020, the weighted average remaining lease terms were 5.49 and 2.98 years; respectively, and the weighted average discount rate were 11% and 15%, respectively.
12
Note 4 – Notes Payable
The outstanding balances for the loans as of June 30, 2021, and December 31, 2020, were as follows:
| June 30, |
|
| December 31, | |
|
| 2021 |
|
| 2020 |
Lines of credit, current portion | $ |
| $ | ||
Equipment loans, current portion |
|
|
| ||
PPP loans |
|
|
| ||
Term notes, current portion |
|
|
| ||
Total current |
|
|
| ||
PPP/EIDL loans |
|
|
| ||
Long-term portion of equipment loans and term notes |
|
|
| ||
Total notes payable | $ |
| $ |
Future scheduled maturities of outstanding notes payable are as follows:
Twelve Months Ending June 30, |
|
|
2022 | $ | |
2023 |
| |
2024 |
| |
2025 |
| |
2026 |
| |
Thereafter |
| |
Total | $ |
During the six months ended June 30, 2021, the Company received forgiveness on four 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 $589,282.
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 six months ended June 30, 2021 as a result of the settlement of the note.
13
Note 5 – Notes Payable, Related Parties
At June 30, 2021, and December 31, 2020, notes payable due to related parties consisted of the following:
|
| June 30, |
|
| December 31, |
| 2021 |
|
| 2020 | |
Notes payable; non-interest bearing; due upon demand; unsecured | $ |
| $ | ||
Series of notes payable, bearing interest at rates from 0% to 20% per annum, with maturity dates from April 2018 to July 2021, unsecured |
|
|
| ||
Total notes payable - related parties | $ |
| $ |
Two non-interest-bearing notes totaling $3,000 were in default as of June 30, 2021. These notes were due on demand by the lenders as of the date of this Report.
Note 6 – Convertible Notes Payable
At June 30, 2021, and December 31, 2020, convertible notes payable consisted of the following:
|
|
| June 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. |
| $ |
| $ | ||
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 six months ended June 30, 2021. |
|
|
|
| ||
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 six months ended June 30, 2021. |
|
|
|
| ||
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. As of June 30, 2021, this note is past due. |
|
|
|
| ||
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. As of June 30, 2021, the remaining note outstanding is past due. |
|
|
|
| ||
Total convertible notes payable |
|
|
|
| ||
Less: discount on convertible notes payable |
|
|
|
| ( | |
Total convertible notes payable, net of discount |
|
|
|
| ||
Less: current portion of convertible notes payable |
|
| ( |
|
| ( |
Long-term portion of convertible notes payable |
| $ |
| $ |
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
-The convertible note with Dwight Hargreaves with a $
14
A loss on extinguishment of debt of $
During the six months ended June 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 $
A summary of the activity in the Company's convertible notes payable is provided below:
Balance outstanding, December 31, 2020 | $ | |||
Issuance of convertible notes payable for cash |
| |||
Repayment of notes |
|
|
| ( |
Conversion of notes payable to common stock |
| ( | ||
Amortization of debt discounts |
|
| ||
Discount from beneficial conversion feature |
| ( | ||
Balance outstanding, June 30, 2021 |
| $ |
Note 7 – Stockholders' Equity
Common Stock
The Company had the following transactions in its common stock during the six months ended June 30, 2021:
·On February 11, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain investors to purchase
·In February 2021, the Company issued
·During the six months ended June 31, 2021, the Company issued
·repurchased
·On May 5, 2021, the Company issued
·On May 10, 2021, the Company issued
·On April 30, 2021, the Company issued
·On May 17, 2021, the Company issued
Preferred Stock
·On February 8, 2021, the Company issued
·In March 2021, the Company repurchased
15
Stock Options
The following summarizes the stock option activity for the six months ended June 30, 2021:
|
|
|
|
|
| Weighted- |
|
|
|
|
|
|
| Weighted- |
| Average |
|
|
|
|
|
|
| Average |
| Remaining |
|
| Aggregate |
|
|
|
| Exercise |
| Contractual |
|
| Intrinsic |
| Options |
|
| Price |
| Life (Years) |
|
| Value |
Outstanding at December 31, 2020 |
| $ |
|
| $ | 6,176,855 | |||
Granted |
|
|
|
|
|
|
| ||
Forfeited |
|
|
|
|
|
|
| ||
Exercised | - |
|
|
|
|
|
|
|
|
Outstanding at June 30, 2021 |
| $ |
|
| $ | ||||
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest |
|
|
|
|
|
|
|
|
|
at June 30, 2021 |
| $ |
|
| $ | ||||
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2021 |
| $ |
| 6.50 |
| $ |
The following table summarizes information about options outstanding and exercisable as of June 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 |
|
|
|
|
|
|
| |||||
| 0.10 |
|
|
|
|
|
|
| |||||
| 0.13 |
|
|
|
|
|
|
| |||||
| 0.26 |
|
|
|
|
|
|
| |||||
| 0.90 |
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
During the six months ended June 30, 2021 and 2020, stock option expense amounted to $27,329 and $39,112, respectively. Unrecognized stock option expense as of June 30, 2021, amounted to $16,419, which will be recognized over a period extending through December 2022.
Warrants
The following summarizes the warrants activity for the six months ended June 30, 2021:
|
|
|
|
|
| Weighted- |
|
|
|
|
|
|
| Weighted- |
| Average |
|
|
|
|
|
|
| Average |
| Remaining |
|
| Aggregate |
|
|
|
| Exercise |
| Contractual |
|
| Intrinsic |
| Warrants |
|
| Price |
| Life (Years) |
|
| Value |
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2020 |
| $ |
|
| $ | ||||
Granted |
|
|
|
|
|
|
| ||
Forfeited | ( |
|
|
|
|
|
|
| |
Exercised |
|
|
|
|
|
|
|
| |
Outstanding at June 30, 2021 |
| $ |
|
| $ | ||||
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest |
|
|
|
|
|
|
|
|
|
at June 30, 2021 |
| $ |
|
| $ | ||||
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2021 |
| $ |
| - |
| $ |
16
The following table summarizes information about warrants outstanding and exercisable as of June 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 |
|
|
| $ |
|
| $ | |||||
|
|
|
|
|
|
|
|
|
|
|
|
During the six months ended June 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, become exercisable on August 16, 2021 and expire on February 16, 2025.
The fair value of the 416,667 warrants, issued to the placement agent during the six months ended June 30, 2021, of $2,498,637 was determined using the Black-Scholes option pricing model with the following assumptions:
Stock price |
| $ |
Risk-free interest rate |
| |
Expected life of the options |
| |
Expected volatility |
| |
Expected dividend yield |
|
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 | $ | |
Property and equipment |
| |
Intellectual property |
| |
Non-solicitation covenant |
| |
Accrued expenses and other current liabilities | ( | |
SBA loan (PPP funds) |
| ( |
| $ |
The purchase price was paid as follows:
Series D Preferred Stock | $ | |
| $ | 6,653,309 |
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
17
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 | $ | |
Contract assets |
| |
Property and equipment |
| |
Intangible assets |
| |
Goodwill |
| |
Accounts payable |
| ( |
Accrued expenses and other current liabilities |
| ( |
Contract liability | ( | |
Notes payable |
| ( |
| $ |
The purchase price was paid as follows:
Class A Common Stock | $ | |
Cash |
| |
| $ | 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 | $ | |
Inventory |
| |
Property and equipment |
| |
Intangible assets |
| |
Goodwill |
| |
Other asset |
| |
Accounts payable |
| ( |
Accrued expenses and other current liabilities | ( | |
Contract liability | ( | |
Noted payable |
| ( |
| $ |
The purchase price was paid as follows:
Class A Common Stock | $ | |
Cash |
| |
| $ | 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 acquisition is expected to close by the end of August 2021.
18
The following are the unaudited pro forma results of operations for the six months ended June 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 June 30, |
|
| Six Months Ended June 30, | ||||
| 2021 |
| 2020 |
|
| 2021 |
| 2020 | |
Sales | $ | $ |
| $ | $ | ||||
Cost of goods sold |
|
|
|
|
| ||||
Gross profit |
|
|
|
|
| ||||
Operating expenses |
|
|
|
|
| ||||
Loss from operations |
| ( |
| ( |
|
| ( |
| ( |
Net loss | ( |
| ( |
|
| ( |
| ( | |
Net loss per share |
| ( |
| ( |
|
| ( |
| ( |
Note 9 – Industry Segments
This summary presents the Company's segments: QCA; APF; Morris Sheet Metal Corp, Morris Enterprises LLC, and Morris Transportation LLC (collectively, “Morris”); Deluxe Sheet Metal, Inc., DSM Holding, LLC (collectively, “DSM”), Excel; IA and Vayu combined; TDI; and Alt Labs for the three and six months ended June 30, 2021, and June 30, 2020, and as of June 30, 2021 and December 31, 2020:
|
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
| |
| QCA | $ | $ | $ | $ | ||||
| APF |
|
|
|
| ||||
| Morris |
|
|
|
| ||||
| Deluxe |
|
|
|
| ||||
| Excel |
|
|
|
| ||||
| TDI |
|
|
|
| ||||
| Alt Labs |
|
|
|
| ||||
|
| $ | 14,130,730 | $ | 9,042,864 | $ | 22,540,269 | $ | 17,878,460 |
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
|
| |
| QCA | $ | $ | $ | $ | ||||
| APF |
|
|
|
| ||||
| Morris |
|
|
|
| ||||
| Deluxe |
|
| ( |
| ( |
| ||
| Excel |
|
|
|
| ||||
| TDI |
|
|
|
| ||||
| Alt Labs |
|
|
|
| ||||
|
| $ | 3,964,060 | $ | 1,956,016 | $ | 4,718,679 | $ | 3,715,760 |
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
|
|
|
|
|
| |
| QCA | $ | $ | $ | $ | ||||
| APF |
| ( |
| ( |
| ( |
| ( |
| Morris |
|
|
| ( |
| |||
| Deluxe |
| ( |
| ( |
| ( |
| ( |
| Excel |
| ( |
|
| ( |
| ||
| IA and Vayu |
| ( |
|
| ( |
| ||
| TDI |
|
|
|
| ||||
| Alt Labs |
|
|
|
| ||||
| Unallocated and eliminations |
| ( |
| ( |
| ( |
| ( |
|
| $ | (2,904,217) | $ | (1,606,197) | $ | (7,976,286) | $ | (2,709,842) |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
19
| QCA | $ | $ | $ | $ | ||||
| APF |
|
|
|
| ||||
| Morris |
|
|
|
| ||||
| Deluxe |
|
|
|
| ||||
| Excel |
|
|
|
| ||||
| IA and Vayu |
|
|
|
| ||||
| TDI |
|
|
|
| ||||
| Alt Labs |
|
|
|
| ||||
| Unallocated and eliminations |
|
|
|
| ||||
|
| $ | 950,738 | $ | 545,282 | $ | 1,673,164 | $ | 1,029,544 |
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
|
|
|
|
|
| |
| QCA | $ | $ | $ | $ | ||||
| APF |
|
|
|
| ||||
| Morris |
|
|
|
| ||||
| Deluxe |
|
|
|
| ||||
| Excel |
|
|
|
| ||||
| TDI |
|
|
|
| ||||
| Alt Labs |
|
|
|
| ||||
| Unallocated and eliminations |
|
|
|
| ||||
|
| $ | 1,216,587 | $ | 905,842 | $ | 2,688,310 | $ | 2,555,069 |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
|
| |
| QCA | $ | $ | $ | $ | ( | |||
| APF |
| ( |
| ( |
| ( |
| ( |
| Morris |
|
| ( |
| ( |
| ||
| Deluxe |
|
| ( |
| ( |
| ( | |
| Excel |
| ( |
|
| ( |
| ||
| IA and Vayu |
| ( |
|
| ( |
| ||
| TDI |
|
|
|
| ||||
| Alt Labs |
|
|
|
| ||||
| Unallocated and eliminations |
| ( |
| ( |
| ( |
| ( |
|
| $ | (3,127,277) | $ | (2,562,914) | $ | (9,256,745) | $ | (2,312,526) |
|
|
|
|
|
|
| As of |
| As of |
|
|
|
|
|
|
| June 30, |
| December 31, |
|
|
|
|
|
| 2021 |
| 2020 | |
Total Assets |
|
|
|
|
|
|
|
| |
| QCA |
|
|
|
| $ | $ | ||
| APF |
|
|
|
|
|
| ||
| Morris |
|
|
|
|
|
| ||
| Deluxe |
|
|
|
|
|
| ||
| Excel |
|
|
|
|
|
| ||
| IA and Vayu |
|
|
|
|
|
| ||
| TDI |
|
|
|
|
|
| ||
| Alt Labs |
|
|
|
|
|
| ||
| Unallocated and eliminations |
|
|
|
|
|
| ||
|
|
|
|
|
| $ | 94,027,836 | $ | 40,734,183 |
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
| |
| QCA |
|
|
|
| $ | $ | ||
| Morris |
|
|
|
|
|
| ||
| Excel |
|
|
|
|
|
| ||
| TDI |
|
|
|
|
|
| ||
| Alt Labs |
|
|
|
|
|
| ||
|
|
|
|
|
| $ | 5,866,454 | $ | 2,084,982 |
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
|
|
|
|
|
| |
| QCA |
|
|
|
| $ | $ | ||
| APF |
|
|
|
|
|
|
20
| Morris |
|
|
|
|
|
| ||
| Deluxe |
|
|
|
|
|
| ||
| Excel |
|
|
|
|
|
| ||
| TDI |
|
|
|
|
|
| ||
| Alt Labs |
|
|
|
|
|
| ||
|
|
|
|
|
| $ | 10,328,941 | $ | 6,484,869 |
|
|
|
|
|
|
|
|
|
|
Note 10 – 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 are ongoing.
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 11 – Subsequent Events
In July and August 2021, the Company received notices from the Small Business Administration that the PPP loans with principal amounts and related interest totaling to $4,287,291 and $72,741, respectively, were forgiven.
On July 7, 2021, the Company issued 52,500 shares of Class A common stock upon the conversion of convertible notes totaling $150,000.
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 six months ended June 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.
21
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.;
-Impossible Aerospace, Inc.;
-Vayu (US), Inc.;
-Thermal Dynamics, Inc.; and
-Alternative Laboratories, LLC.
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. 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. Management anticipates that Deluxe and Morris will be fully integrated by May 2021. 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”).
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.
22
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.
How We Do It:
23
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 June 30, 2021, as compared to the three months ended June 30, 2020.
|
|
|
|
| Three Months Ended June 30, 2021 |
| Three Months Ended June 30, 2020 |
| $ Change |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
| $ | 14,130,730 | $ | 9,042,864 | $ | 5,087,866 | |
Cost of revenue |
|
|
| 10,166,670 |
| 7,086,848 |
| 3,079,822 | |
Gross Profit |
|
|
| 3,964,060 |
| 1,956,016 |
| 2,008,044 | |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
| ||
| General and administrative expenses |
| 6,353,075 |
| 2,450,613 |
| 3,902,462 | ||
| Impairment loss of intangible assets |
| - |
| 1,111,600 |
| (1,111,600) | ||
| Research and development |
| 515,202 |
| - |
| 515,202 | ||
| Total operating expenses |
| 6,868,277 |
| 3,562,213 |
| 3,306,064 | ||
Loss from operations |
|
| (2,904,217) |
| (1,606,197) |
| (1,298,020) | ||
|
|
|
|
|
|
|
|
|
|
Other income (expenses) |
|
|
|
|
|
|
| ||
| Interest expense |
|
| (1,216,587) |
| (905,842) |
| (310,745) | |
| Gain (loss) on extinguishment of debt |
| 803,079 |
| (62,951) |
| 866,030 | ||
| Gain on forgiveness of debt |
| 159,742 |
| - |
| 159,742 | ||
| Other income |
|
|
| 30,706 |
| 12,076 |
| 18,630 |
| Total other income (expenses) |
|
| (223,060) |
| (956,717) |
| 733,657 | |
|
|
|
|
|
|
|
|
|
|
Loss before income tax |
|
| (3,127,277) |
| (2,562,914) |
| (564,363) | ||
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| - |
| - |
| - | ||
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| $ | (3,127,277) | $ | (2,562,914) | $ | (564,363) |
Revenue
Our revenues for the three months ended June 30, 2021, increased by $5,087,866 as compared to the three months ended June 30, 2020. In 2021, the increase in revenue is related 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 June 30, 2021, increased by $3,079,822 as compared to the three months ended June 30, 2020. In 2021, the increase in cost of revenue is related the acquisition of TDI and Alt Labs. Cost of revenue also increased related to increased revenues for QCA and Morris.
Operating expenses
Our operating expenses for the three months ended June 30, 2021, increased by $3,306,064 as compared to the three months ended June 30, 2020. The increase is due to the acquisitions of TDI and Alt Labs.
25
Other income (expenses)
Other expenses for the three months ended June 30, 2021, decreased by $733,657 as compared to the same period in 2020. This decrease was primarily due to settlement of debts.
The following are the results of our operations for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020.
|
|
|
|
| Six Months Ended June 30, 2021 |
| Six Months Ended June 30, 2020 |
| $ Change |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
| $ | 22,540,269 | $ | 17,878,460 | $ | 4,661,809 | |
Cost of revenue |
|
|
| 17,821,590 |
| 14,162,700 |
| 3,658,890 | |
Gross Profit |
|
|
| 4,718,679 |
| 3,715,760 |
| 1,002,919 | |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
| ||
| General and administrative expenses |
| 12,179,763 |
| 5,314,002 |
| 6,865,761 | ||
| Impairment loss of intangible assets |
| - |
| 1,111,600 |
| (1,111,600) | ||
| Research and development |
| 515,202 |
| - |
| 515,202 | ||
| Total operating expenses |
| 12,694,965 |
| 6,425,602 |
| 6,269,363 | ||
Loss from operations |
|
| (7,976,286) |
| (2,709,842) |
| (5,266,444) | ||
|
|
|
|
|
|
|
|
|
|
Other income (expenses) |
|
|
|
|
|
|
| ||
| Interest expense |
|
| (2,688,310) |
| (2,555,069) |
| (133,241) | |
| Change in value of derivative liability |
|
| - |
| 2,298,609 |
| (2,298,609) | |
| Gain on extinguishment of debt |
| 803,079 |
| 91,641 |
| 711,438 | ||
| Change in fair value of contingent consideration |
| - |
| 500,000 |
| (500,000) | ||
| Gain on forgiveness of debt |
| 589,282 |
| - |
| 589,282 | ||
| Other income |
|
|
| 15,490 |
| 62,135 |
| (46,645) |
| Total other income (expenses) |
|
| (1,280,459) |
| 397,316 |
| (1,677,775) | |
|
|
|
|
|
|
|
|
|
|
Loss before income tax |
|
| (9,256,745) |
| (2,312,526) |
| (6,944,219) | ||
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| - |
| - |
| - | ||
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| $ | (9,256,745) | $ | (2,312,526) | $ | (6,944,219) |
During the six months ended June 30, 2021, the Company had several one-time / non-recurring items included in the $9,256,745 net loss. These non-recurring items totaled $4,363,435, consisting of $1,100,000 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 six months ended June 30, 2021, increased by $4,661,809 as compared to the six months ended June 30, 2020. In 2021, the increase in revenue is related 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 six months ended June 30, 2021, increased by $3,658,890 as compared to the six months ended June 30, 2020. In 2021, the increase in cost of revenue is related the acquisition of TDI and Alt Labs. Cost of revenue also increased related to increased revenues for QCA and Morris.
26
Operating expenses
Our operating expenses for the six months ended June 30, 2021, increased by $6,269,363 as compared to the six months ended June 30, 2020. The increase is due to 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 expenses for the six months ended June 30, 2021, increased by $1,677,775 as compared to the same period in 2020. This increase was primarily due to the change in derivative liability, and settlement of debts.
Liquidity and Capital Resources
We have financed our operations since inception from 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 six months ended June 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. Four loans totaling $589,282 were forgiven during the six months ended June 30, 2021, and in July 2021, five loans totaling $4,287,291 were forgiven by the SBA.
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. 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 bank financing or to engage in debt financing through a placement agent.
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 six months ended June 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, June 30, 2021. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive 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, 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 accounting staff, including a Chief Accounting Officer. Management will continue to work to improve the Company’s disclosure controls and procedures throughout 2021.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended June 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 are ongoing.
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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuances in 2021
In January 2021, the Company issued 1,428,572 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 six-months ended June 30, 2021, the Company issued an aggregate of 5,998,185 shares of its restricted Class A common stock for convertible debt of $1,529,398.
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 to Class AC 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 converted to 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 to 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.
Item 3. Defaults Upon Senior Securities.
None
Item 5. Other Information
Not Applicable
29
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). |
|
|
|
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). |
|
|
|
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* |
|
|
|
30
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: August 16, 2021
By: /s/ Kent B. Wilson
Kent B. Wilson
Chief Executive Officer
(Principal Executive Officer, Principal Accounting Officer)
By: /s/ Larry Zic
Larry Zic
Chief Accounting Officer
(Principal Accounting Officer)
32