Alpine 4 (ALPP) - 2019 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements Unaudited consolidated financial statements for Alpine 4 Technologies as of September 30, 2019, detailing financial position, performance, and cash flows Consolidated Balance Sheets Total assets and liabilities significantly increased due to acquisitions, resulting in a slightly improved stockholders' deficit Consolidated Balance Sheet Summary | Balance Sheet Items | Sep 30, 2019 (unaudited, USD) | Dec 31, 2018 (USD) | | :--- | :--- | :--- | | Total Current Assets | $9,172,499 | $5,401,084 | | Total Assets | $26,272,933 | $17,940,676 | | Total Current Liabilities | $18,296,382 | $15,568,183 | | Total Liabilities | $37,478,454 | $29,439,104 | | Total Stockholders' Deficit | ($11,205,521) | ($11,498,428) | Consolidated Statements of Operations Revenue significantly increased for Q3 and nine months, with net income improving due to acquisitions and other gains Three Months Ended September 30 | Metric | 2019 (USD) | 2018 (USD) | | :--- | :--- | :--- | | Revenue | $7,088,182 | $4,342,203 | | Gross Profit | $1,776,859 | $2,222,290 | | Income (Loss) from Operations | $36,992 | ($164,802) | | Net Income (Loss) | $2,805,182 | ($2,874,626) | | Basic EPS | $0.03 | ($0.09) | Nine Months Ended September 30 | Metric | 2019 (USD) | 2018 (USD) | | :--- | :--- | :--- | | Revenue | $20,690,014 | $10,570,032 | | Gross Profit | $5,147,820 | $4,091,942 | | Loss from Operations | ($362,176) | ($163,093) | | Net Loss | ($1,161,983) | ($4,112,998) | | Basic EPS | ($0.02) | ($0.15) | Consolidated Statements of Cash Flows Cash flow from operations improved, with investing activities focused on acquisitions and financing providing necessary capital Cash Flow Summary for Nine Months Ended September 30 | Cash Flow Activity | 2019 (USD) | 2018 (USD) | | :--- | :--- | :--- | | Net cash used in operating activities | ($101,203) | ($1,511,233) | | Net cash used in investing activities | ($2,016,484) | ($1,787,551) | | Net cash provided by financing activities | $2,161,501 | $3,507,514 | | Net increase in cash | $43,814 | $208,730 | | Cash, ending balance | $458,330 | $544,553 | Notes to Unaudited Consolidated Financial Statements Notes provide critical context on business organization, accounting policies, acquisitions, discontinued operations, and going concern - The company is a technology holding company that acquired Morris Sheet Metal Corp. effective January 1, 2019[18] - The company adopted ASC 606 (Revenue) and ASC 842 (Leases), with ASC 842 leading to $891,413 in right-of-use assets and lease liabilities[40][57] - Recurring losses and a working capital deficit raise substantial doubt about the company's ability to continue as a going concern, with management planning to leverage acquisitions and new debt[60][61] - The VWES subsidiary filed for Chapter 7 bankruptcy and is reported as a discontinued operation, resulting in a $2,515,028 gain on disposition[117][119] - Subsequent to quarter end, the company acquired Deluxe Sheet Metal, Inc. (DSM) for $8.4 million and settled several convertible notes[124][125] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the DSF business model, highlighting acquisition-driven revenue growth, going concern risk, and liquidity management Business Strategy The company's DSF model acquires diverse B2B companies (Drivers, Stabilizers, Facilitators) to foster synergistic competitive advantages - The company's core business model is DSF (Drivers, Stabilizers, Facilitators), building a diverse portfolio of synergistic B2B companies[132] - The DSF model categorizes acquisitions as Driver (high growth), Stabilizer (consistent revenue), and Facilitator (synergistic services)[134][135] Results of Operations Revenue significantly increased for Q3 and nine months, primarily due to acquisitions, with the net loss narrowing from discontinued operations Results of Operations Comparison - Three Months Ended Sep 30 | Metric | 2019 (USD) | 2018 (USD) | Change (USD) | | :--- | :--- | :--- | :--- | | Revenue | $7,088,182 | $4,342,203 | $2,745,979 | | Gross Profit | $1,776,859 | $2,222,290 | ($445,431) | | Net Income (Loss) | $2,805,182 | ($2,874,626) | $5,679,808 | Results of Operations Comparison - Nine Months Ended Sep 30 | Metric | 2019 (USD) | 2018 (USD) | Change (USD) | | :--- | :--- | :--- | :--- | | Revenue | $20,690,014 | $10,570,032 | $10,119,982 | | Gross Profit | $5,147,820 | $4,091,942 | $1,055,878 | | Net Loss | ($1,161,983) | ($4,112,998) | $2,951,015 | - The Q3 2019 revenue increase was primarily driven by the Morris acquisition, contributing $3,820,472 in revenue[149] - The nine-month net loss includes a $2,419,849 positive impact from discontinued operations, a significant improvement from the prior year[157] Liquidity and Capital Resources The company historically financed operations through equity and debt, with future funding expected from cash flow, securities, and new debt - The company has financed operations through a combination of equity sales, shareholder contributions, and debt issuance[165] - Future funding is expected from operating cash flow, sales of securities, and potential new debt financing[165][167] Quantitative and Qualitative Disclosures About Market Risk As a Smaller Reporting Company, Alpine 4 Technologies is not required to provide this disclosure - The company is exempt from this disclosure requirement as it qualifies as a Smaller Reporting Company[169] Controls and Procedures Management concluded disclosure controls and procedures were ineffective due to material weaknesses in internal financial reporting controls - Management concluded that disclosure controls and procedures were ineffective as of September 30, 2019[172] - Material weaknesses identified include inadequate segregation of duties and insufficient control activities and monitoring processes over financial reporting[172] - No material changes were made to internal control over financial reporting during the quarter[173] PART II - OTHER INFORMATION Legal Proceedings A lawsuit alleging tortious interference of contract against the company was dismissed with prejudice in January 2019 - The lawsuit Kevin Cannon et al. v. Alpine 4 Technologies Ltd., alleging tortious interference, was dismissed with prejudice on January 28, 2019[173] Unregistered Sales of Equity Securities and Use of Proceeds The company issued approximately 33 million Class A shares for note conversions and Class B/C shares for services in Q3 2019 - In Q3 2019, the company issued 32,956,827 shares of Class A common stock for note conversions[174] - The company also issued 200,000 shares of Class B and 2,772,606 shares of Class C common stock to officers, directors, and employees for services[174] Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported during the period[175] Exhibits This section lists exhibits filed with the quarterly report, including corporate documents, securities agreements, and officer certifications