Alpine 4 (ALPP) - 2019 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements, management's analysis, and related disclosures Item 1. Financial Statements This section provides the unaudited consolidated financial statements and comprehensive notes for the period ended June 30, 2019 Consolidated Balance Sheets The company's total assets grew to $26.5 million as of June 30, 2019, from $17.9 million at the end of 2018, primarily driven by acquisitions, leading to a larger total stockholders' deficit of $14.8 million Consolidated Balance Sheet Summary (as of June 30, 2019 vs. December 31, 2018) | Metric | June 30, 2019 (USD) | December 31, 2018 (USD) | | :--- | :--- | :--- | | Total Current Assets | $9,288,297 | $5,401,084 | | Total Assets | $26,501,876 | $17,940,676 | | Total Current Liabilities | $21,135,752 | $15,568,183 | | Total Liabilities | $41,322,339 | $29,439,104 | | Total Stockholders' Deficit | ($14,820,463) | ($11,498,428) | Consolidated Statements of Operations For the six months ended June 30, 2019, revenue more than doubled to $13.6 million from $6.2 million year-over-year, largely due to acquisitions, while net loss from continuing operations widened significantly to $6.4 million Statement of Operations Highlights (Six Months Ended June 30) | Metric | 2019 (USD) | 2018 (USD) | | :--- | :--- | :--- | | Revenue | $13,601,832 | $6,227,829 | | Gross Profit | $3,370,961 | $1,869,652 | | Loss from Continuing Operations | ($6,387,014) | ($569,750) | | Net Loss | ($3,967,165) | ($1,238,372) | | Basic & Diluted Loss Per Share | ($0.11) | ($0.05) | Consolidated Statements of Cash Flows For the first six months of 2019, the company used $0.7 million in cash from operating activities, an improvement from the $1.2 million used in the same period of 2018, with financing activities providing $2.6 million in net cash Cash Flow Summary (Six Months Ended June 30) | Activity | 2019 (USD) | 2018 (USD) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($675,209) | ($1,224,847) | | Net Cash Used in Investing Activities | ($1,996,285) | ($1,890,973) | | Net Cash Provided by Financing Activities | $2,624,466 | $3,316,745 | | Net (Decrease) Increase in Cash | ($47,028) | $200,925 | Notes to Unaudited Consolidated Financial Statements The notes provide critical context to the financial statements, including the company's structure, adoption of ASC 842, a going concern warning, acquisition details, and the impact of derivative liabilities - The company is a technology holding company that acquired Morris Sheet Metal Corp effective January 1, 2019[19] - The company adopted the new lease accounting standard ASC 842 on January 1, 2019, resulting in the recognition of a right-of-use asset and lease payable obligation of $676,944 on the balance sheet[57] - The financial statements include a going concern warning, citing recurring losses and a working capital deficit, which raise substantial doubt about the company's ability to continue operations[59] - The company shut down its VWES subsidiary, which filed for Chapter 7 bankruptcy in February 2019, resulting in a gain on disposition of discontinued operations of $2,515,028[117][120] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the business model, analyzes financial performance, and addresses the going concern risk and mitigation plans Results of Operations For the six months ended June 30, 2019, revenues grew by $7.4 million (118%) year-over-year to $13.6 million, primarily due to acquisitions, while the net loss widened to $4.0 million due to higher costs and non-cash expenses Results of Operations (Three Months Ended June 30) | Metric | 2019 (USD) | 2018 (USD) | Change (USD) | | :--- | :--- | :--- | :--- | | Revenue | $6,475,843 | $3,621,348 | +$2,854,495 | | Gross Profit | $1,253,428 | $1,206,745 | +$46,683 | | Loss from Operations | ($50,199) | ($33,759) | ($16,440) | | Net Loss | ($4,956,676) | ($577,294) | ($4,379,382) | - The increase in Q2 2019 revenue was primarily driven by the acquisitions of APF (contributing $287,866 in growth) and Morris (contributing $2,870,574)[133] Results of Operations (Six Months Ended June 30) | Metric | 2019 (USD) | 2018 (USD) | Change (USD) | | :--- | :--- | :--- | :--- | | Revenue | $13,601,832 | $6,227,829 | +$7,374,003 | | Gross Profit | $3,370,961 | $1,869,652 | +$1,501,309 | | Loss from Operations | ($399,168) | $1,709 | ($400,877) | | Net Loss | ($3,967,165) | ($1,238,372) | ($2,728,793) | - The increase in revenue for the first six months of 2019 was driven by acquisitions of APF ($1,996,858) and Morris ($5,741,371)[142] Going Concern and Liquidity The company acknowledges substantial doubt about its ability to continue as a going concern due to an accumulated deficit of $32.5 million, outlining a plan to mitigate this through increased cash flow from acquisitions and new debt financing - The company has incurred losses since inception, resulting in an accumulated deficit of $32,487,259 as of June 30, 2019, which raises substantial doubt about its ability to continue as a going concern[129] - Management's three-fold plan to mitigate going concern risk includes: 1) increased cash flow from acquisitions, 2) pursuing other potential acquisitions, and 3) exploring new debt options[130] - The company has historically financed operations through stock sales, capital contributions, and notes payable, and expects to continue financing through operating cash flow, stock sales, or debt instruments[150] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a Smaller Reporting Company, Alpine 4 Technologies is not required to provide the disclosures typically included under this item - The Company is not required to include disclosure under this item as it qualifies as a Smaller Reporting Company[156] Item 4. Controls and Procedures Management concluded that as of June 30, 2019, the company's disclosure controls and procedures were ineffective due to material weaknesses in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were ineffective as of the end of the reporting period[160] - Material weaknesses identified include: (i) inadequate segregation of duties and effective risk assessment; and (ii) inadequate control activities and monitoring processes over financial reporting[160] - No changes were made to the internal control over financial reporting during the quarter that materially affected or are likely to materially affect these controls[161] PART II - OTHER INFORMATION This section provides additional information including legal proceedings, equity sales, defaults, and exhibits Item 1. Legal Proceedings A lawsuit filed against the company in October 2017, alleging tortious interference of contract, was resolved with all claims dismissed with prejudice on January 28, 2019 - In the case of Kevin Cannon et al. v. Alpine 4 Technologies Ltd., all claims against the Company were dismissed with prejudice on January 28, 2019[162] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the second quarter of 2019, the company issued 33,975,924 shares of restricted Class A common stock in exchange for the conversion of debt, issued without registration under the Securities Act of 1933 - During the quarter ended June 30, 2019, the Company issued 33,975,924 shares of its restricted Class A common stock for note conversions[163] Item 3. Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period - None[163] Item 5. Other Information There was no other information to report for this period - Not Applicable[163] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, acquisition agreements, and CEO/CFO certifications - The report includes standard corporate governance documents, agreements related to the APF acquisition, and CEO/CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[165]