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ALPINE 4 HOLDINGS, INC. - Quarter Report: 2022 September (Form 10-Q)

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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
o    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-40913
alpp10q_1.jpg
Alpine 4 Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware46-5482689
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
2525 E Arizona Biltmore Circle, Suite 237
Phoenix, AZ
85016
(Address of Principal Executive Offices)(Zip Code)
Registrant's telephone number, including area code: 480-702-2431
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
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 fileroAccelerated filero
Non-accelerated filerxSmaller reporting companyx
Emerging growth companyx
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No x
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. x
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of April 24, 2023, the issuer had 180,037,350 shares of its Class A common stock issued and outstanding, 7,248,088 shares of its Class B common stock issued and outstanding and 12,256,816 shares of its Class C common stock issued and outstanding.


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CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements and information in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 (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 and the services we provide; our ability to obtain products from the respective manufacturers; 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, 2021, as amended.
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.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ALPINE 4 HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30,
2022
December 31,
2021
(unaudited)
ASSETS
CURRENT ASSETS:
Cash $5,452,076 $3,715,666 
Accounts receivable, net 16,457,483 11,875,176 
Inventory24,982,586 24,419,654 
Contract assets1,407,506 877,904 
Prepaid expenses and other current assets2,566,211 1,955,907 
Total current assets 50,865,862 42,844,307 
Property and equipment, net19,905,697 28,101,471 
Intangible assets, net37,154,408 39,180,664 
Right of use assets10,208,983 1,460,206 
Goodwill 22,680,084 22,680,084 
Other non-current assets 1,769,147 357,118 
TOTAL ASSETS $142,584,181 $134,623,850 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $8,128,315 $7,744,957 
Accrued expenses 6,087,231 5,074,006 
Contract liabilities 3,369,492 6,359,449 
Line of credit6,047,076 4,473,489 
Notes payable, current portion 3,207,354 5,690,524 
Financing lease obligation, current portion 707,468 649,343 
Operating lease obligation, current portion 858,994 428,596 
Total current liabilities 28,405,930 30,420,364 
Notes payable, net of current portion4,346,465 8,426,105 
Line of credit, net of current portion8,941,526 5,640,051 
Financing lease obligations, net of current portion14,781,070 15,319,467 
Operating lease obligations, net of current portion9,260,313 1,066,562 
Preferred stock subject to redemption— 400,092 
Deferred tax liability1,389,987 1,861,165 
TOTAL LIABILITIES 67,125,291 63,133,806 
STOCKHOLDERS' EQUITY:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized
— — 
Series B preferred stock; $1.00 stated value; 100 shares authorized, 5 and 5 shares issued and outstanding at September 30, 2022 and December 31, 2021
Class A Common stock, $0.0001 par value, 295,000,000 shares authorized, 178,198,454 and 161,798,817 shares issued and outstanding at September 30, 2022 and December 31, 2021
17,822 16,182 
Class B Common stock, $0.0001 par value, 10,000,000 shares authorized, 8,548,088 and 8,548,088 shares issued and outstanding at September 30, 2022 and December 31, 2021
854 854 
Class C Common stock, $0.0001 par value, 15,000,000 shares authorized, 12,462,700 and 12,500,200 shares issued and outstanding at September 30, 2022 and December 31, 2021
1,246 1,250 
Additional paid-in capital 141,539,601 130,348,267 
Accumulated deficit (66,100,638)(58,876,514)
Total stockholders' equity 75,458,890 71,490,044 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $142,584,181 $134,623,850 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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ALPINE 4 HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenues, net $27,486,415 $17,398,316 $78,349,695 $39,938,585 
Cost of revenues21,218,317 12,950,180 60,283,597 30,771,770 
Gross profit6,268,098 4,448,136 18,066,098 9,166,815 
Operating expenses:
General and administrative expenses10,186,857 5,539,465 28,604,937 17,719,228 
Research and development88,960 581,131 675,725 1,096,333 
Gain on sale of property(115,700)— (5,938,150)— 
Total operating expenses10,160,117 6,120,596 23,342,512 18,815,561 
Loss from operations(3,892,019)(1,672,460)(5,276,414)(9,648,746)
Other income (expenses)
Interest expense (1,055,687)(351,823)(2,627,122)(2,736,369)
Gain on extinguishment of debt— — — 803,079 
Gain on forgiveness of debt— 3,457,499 — 3,617,241 
Other income (expense)(12,940)438,701 278,439 454,191 
Total other income (expenses)(1,068,627)3,544,377 (2,348,683)2,138,142 
Income (loss) before income tax(4,960,646)1,871,917 (7,625,097)(7,510,604)
Income tax expense (benefit)(196,276)54,058 (400,973)54,058 
Net income (loss)$(4,764,370)$1,817,859 $(7,224,124)$(7,564,662)
Weighted average shares outstanding:
Basic197,768,559 166,964,408 187,778,448 161,118,324 
Diluted197,768,559 168,627,907 187,778,448 161,118,324 
Basic income (loss) per share$(0.02)$0.01 $(0.04)$(0.04)
Diluted income (loss) per share$(0.02)$0.01 $(0.04)$(0.04)
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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ALPINE 4 HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
Series B Preferred StockSeries C Preferred StockSeries D Preferred StockClass A Common
Stock
Class B Common
Stock
Class C Common
Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Total Stockholders’
Equity
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance, December 31, 2021
$— $— — $— 161,798,817 $16,182 8,548,088 $854 12,500,200 $1,250 $130,348,267 $(58,876,514)$71,490,044 
Issuance of shares of common stock for compensation— — — — — — 39,386 — — — — 99,248 — 99,252 
Conversion of series D preferred stock to Class A— — — — — — 63,907 — — — — 365,463 — 365,470 
Conversion of series C preferred stock to Class A— — — — — — 8,245 — — — — — 34,622 — 34,622 
Share-based compensation expense— — — — — — — — — — — — 93,197 — 93,197 
Net loss— — — — — — — — — — — — — (3,999,560)(3,999,560)
Balance, March 31, 2022— — — — 161,910,355 16,193 8,548,088 854 12,500,200 1,250 130,940,797 (62,876,074)68,083,025 
Issuance of shares of common stock for compensation— — — — — — 171,850 18 — — — — 132,307 — 132,325 
Common shares issued for cash— — — — — — 76,119 — — — — 55,136 — 55,144 
Share-based compensation expense— — — — — — — — — — — — 172,183 — 172,183 
Net income— — — — — — — — — — — — — 1,539,806 1,539,806 
Balance, June 30, 2022— — — — 162,158,324 16,219 8,548,088 854 12,500,200 1,250 — 131,300,423 (61,336,268)69,982,483 
Exchange of shares of common stock for compensation— — — — — — 37,500 — — (37,500)(4)— — — 
Issuance of shares of common stock for cash, net of offering costs14,492,754 1,448 9,173,552 9,175,000 
Common shares issued for cash— — — — — — 1,509,876 151 — — — — 1,042,167 — 1,042,318 
Share-based compensation expense— — — — — — — — — — — — 23,459 — 23,459 
Net loss— — — — — — — — — — — — — (4,764,370)(4,764,370)
Balance, September 30, 2022$— $— — $— 178,198,454 $17,822 8,548,088 $854 12,462,700 $1,246 $— $141,539,601 $(66,100,638)$75,458,890 
Balance, December 31, 2020$— $— — $— 126,363,158 $12,636 9,023,088 $902 14,162,267 $1,417 $25,144,136 $(39,393,376)$(14,234,280)
Issuance of shares of common stock for cash, net of offering costs— — — — — — 9,857,397 985 — — — — 54,301,997 — 54,302,982 
Issuance of shares of common stock for convertible note payable and accrued interest— — — — — — 702,877 70 — — — — 109,760 — 109,830 
Issuance of shares of Series D preferred stock for acquisition— — — — — — — — — — — — — — — 
Repurchase of Class C common stock— — — — — — — — — — (45,000)(5)(185,845)— (185,850)
Share-based compensation expense— — — — — — — — — — — — 19,341 — 19,341 
Beneficial conversion feature on convertible notes— — — — — — — — — — — — 92,428 — 92,428 
Net loss— — — — — — — — — — — — — (6,441,302)(6,441,302)
Balance, March 31, 2021— — — — 136,923,432 13,691 9,023,088 902 14,117,267 1,412 79,481,817 (45,834,678)33,663,149 
Issuance of shares of common stock for acquisitions— — — — — — 643,010 64 — — — — 2,535,007 — 2,535,071 
Issuance of shares of common stock for convertible note payable and accrued interest— — — — — — 5,295,308 534 — — — — 1,419,034 — 1,419,568 
Conversions of Class C to Class A— — — — — — 1,617,067 162 — — (1,617,067)(162)— — — 
Conversion of Class B to Class A— — — — — — 350,000 35 (350,000)(35)— — — — — 
Share-based compensation expense— — — — — — — — — — — — 7,988 — 7,988 
Net loss— — — — — — — — — — — — — (2,941,219)(2,941,219)
Balance, June 30, 2021— — — — 144,828,817 14,486 8,673,088 867 12,500,200 1,250 83,443,846 (48,775,897)34,684,557 
Issuance of shares of common stock for convertible note payable and accrued interest— — — — — — 1,385,833 138 — — — — 357,362 — 357,500 
Share-based compensation expense— — — — — — — — — — — — 4,604 — 4,604 
Net income— — — — — — — — — — — — — 1,817,859 1,817,859 
Balance, September 30, 2021$— $— — $— 146,214,650 $14,624 8,673,088 $867 12,500,200 $1,250 $83,805,812 $(46,958,038)$36,864,520 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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ALPINE 4 HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended September 30,
20222021
OPERATING ACTIVITIES:
Net loss$(7,224,124)$(7,564,662)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation2,313,984 1,642,638 
Amortization2,276,256 1,209,331 
Gain on extinguishment of debt— (803,079)
Gain on forgiveness of debt— (3,617,241)
Gain on sale of property(5,938,150)— 
Amortization of preferred stock subject to redemption— (489,823)
Employee stock compensation520,416 31,933 
Amortization of debt discounts— 1,436,052 
Operating lease expense519,818 328,628 
Write off of inventory71,552 — 
Bad debt expense115,835 — 
Changes in current assets and liabilities:
Accounts receivable(4,698,142)(6,096,678)
Inventory(634,484)(4,343,866)
Contract assets(529,602)(2,111,973)
Prepaid expenses and other assets(2,022,333)(696,471)
Accounts payable383,358 (17,460)
Accrued expenses1,013,225 1,045,007 
Contract liabilities(2,989,957)(835,632)
Deferred tax liability(471,178)— 
Operating lease liability(419,446)(343,670)
Net cash used in operating activities(17,712,972)(21,226,966)
INVESTING ACTIVITIES:
Capital expenditures(756,870)(2,970,087)
Proceeds from sale of property12,454,943 — 
Cash paid for equity investment— (350,000)
Proceeds from sale of asset140,710 — 
Cash paid for acquisition— (16,824,000)
Cash assumed in acquisition— 81,442 
Cash paid in international technology agreement(250,000)— 
Net cash provided by (used) in investing activities11,588,783 (20,062,645)
FINANCING ACTIVITIES:
Proceeds from the sale of common stock, net of offering costs10,272,462 54,302,982 
Proceeds from issuances of notes payable, non-related party500,000 15,609 
Proceeds from issuances of convertible notes payable— 408,000 
Net proceeds from line of credit4,875,062 897,939 
Repayment of mortgage on property(4,642,043)— 
Repurchase of common stock— (185,850)
Repayments of notes payable, related party— (235,651)
Repayments of notes payable, non-related parties(2,664,610)(7,041,401)
Repayments of convertible notes payable— (1,680,964)
Cash paid on financing lease obligations(480,272)(487,723)
Net cash provided by financing activities7,860,599 45,992,941 
NET INCREASE IN CASH1,736,410 4,703,330 
CASH, BEGINNING BALANCE3,715,666 722,583 
CASH, ENDING BALANCE$5,452,076 $5,425,913 
CASH PAID FOR:
Interest$2,617,292 $1,593,255 
Income taxes$— $54,058 
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:
Common stock issued for convertible note payable and accrued interest$— $1,886,898 
Common stock issued for acquisition$— $2,535,071 
ROU asset and operating lease obligation recognized$9,043,595 $95,029 
Remeasurement of finance lease liability$— $279,287 
Equipment purchased on note payable$243,843 $— 
Conversion of series D preferred stock for common stock$365,470 $— 
Conversion of series C preferred stock for common stock$34,622 $— 
Mortgage on property purchase$— $4,680,000 
Accounts receivable converted to equity investment$— $1,000,000 
Issuance of shares of series D preferred stock for acquisition$— $6,653,309 
Beneficial conversion feature on convertible notes$— $92,428 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Alpine 4 Holdings, Inc., and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
For the Nine Months Ended September 30, 2022
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 Amended Annual Report on Form 10-K/A filed with the SEC on March 17, 2023. The results for the nine months ended September 30, 2022, are not necessarily indicative of the results to be expected for the year ending December 31, 2022.
The Company was incorporated under the laws of the State of Delaware on April 22, 2014. The Company was formed to serve as a vehicle to affect an asset acquisition, merger, exchange of capital stock, or other business combination with a domestic or foreign business. On March 2, 2021, the Company changed its name from Alpine 4 Technologies Ltd. to Alpine 4 Holdings, Inc.
Effective April 1, 2016, the Company purchased all of the outstanding capital stock of Quality Circuit Assembly, Inc., a California corporation (“QCA”).
Effective January 1, 2019, the Company purchased all of the outstanding capital stock of Morris Sheet Metal Corp., an Indiana corporation (“MSM”); JTD Spiral, Inc., an Indiana corporation wholly owned by MSM; Morris Enterprises LLC, an Indiana limited liability company; and Morris Transportation LLC, an Indiana limited liability company (collectively “Morris”).
Effective November 6, 2019, the Company purchased all of the outstanding capital stock and units of Deluxe Sheet Metal, Inc., an Indiana corporation, and DSM Holding, LLC, an Indiana limited liability company; and purchased certain real estate from Lonewolf Enterprises, LLC, an Indiana limited liability company (collectively “Deluxe”).
Effective February 21, 2020, the Company purchased all of the outstanding units of Excel Fabrication, LLC., an Idaho limited liability company (“Excel”). Excel subsequently changed its name to Excel Construction Services, LLC.
Effective December 15, 2020, the Company purchased the assets of Impossible Aerospace Corporation, a Delaware corporation (“IA”).
Effective February 8, 2021, the Company purchased the assets of Vayu (US), Inc., a Delaware corporation (“Vayu”).
On May 5, 2021, the Company acquired all of the outstanding shares of stock of Thermal Dynamics International, Inc., a Delaware corporation (“TDI”).
On May 10, 2021, the Company acquired all of the outstanding membership interests of KAI Enterprises, LLC, a Florida limited liability company, the sole asset of which was all of the outstanding membership interests of Alternative Laboratories, LLC, a Delaware limited liability company (“Alt Labs”).
On October 20, 2021, the Company acquired 100% of the outstanding shares of Identified Technologies Corporation, a Delaware corporation (“Identified Technologies”).
On November 29, 2021, the Company, and a newly formed and wholly owned subsidiary of the Company named ALPP Acquisition Corporation 3, Inc. (“AC3”), entered into a merger agreement with ElecJet Corp., (“ElecJet”) and the three ElecJet shareholders. Pursuant to the agreement, AC3 merged with and into ElecJet with ElecJet being the surviving entity following the merger.

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On December 9, 2021, the Company, and A4 Technologies, Inc., a wholly owned subsidiary of the Company (“A4 Technologies”), entered into a Membership Interest Purchase Agreement with DTI Services Limited Liability Company (doing business as RCA Commercial Electronics), (“DTI”), Direct Tech Sales LLC, (also having an assumed business name of RCA Commercial Electronics), (“Direct Tech”), PMI Group, LLC, (“PMI”), Continu.Us, LLC, (“Continu.Us”), Solas Ray, LLC, (“Solas”), and the individual owners of the interests of the various entities. DTI, Direct Tech, PMI, Continu.Us, and Solas were each referred to in the Membership Interest Purchase Agreement collectively as “RCA.” Pursuant to the MIPA, the Company acquired all of the outstanding membership interests of RCA.
As of the date of this Report, the Company was a holding company owning, directly or indirectly, fourteen companies:
A4 Corporate Services, LLC;
ALTIA, LLC;
Quality Circuit Assembly, Inc.;
Morris Sheet Metal, Corp;
JTD Spiral, Inc.;
Excel Construction Services, LLC;
SPECTRUMebos, Inc.;
Vayu (US);
Thermal Dynamics International, Inc.;
Alternative Laboratories, LLC.;
Identified Technologies, Corp.;
ElecJet Corp.;
DTI Services Limited Liability Company (doing business as RCA Commercial Electronics); and
Global Autonomous Corporation.
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.
As shown in the accompanying consolidated financial statements, the Company has incurred significant recurring losses and negative cash flows from operations. These factors raise doubt about the Company's ability to continue as a going concern. While the Company had a negative cash flow used in operation of $17.7 million for the nine months ended September 30, 2022, it was an improvement over the same period last year, the nine months ended September 30, 2021, when the Company had a negative cash flow used in operations of $21.2 million.
As of September 30, 2022, the Company had positive working capital of approximately $22.5 million, which was an increase of $10.0 million compared to December 31, 2021. The Company has secured bank financing totaling $33.0 million in lines of credit of which approximately $2.1 million was unused as of September 30, 2022. Likewise, subsequent to June 30, 2022, the Company raised net proceeds of approximately $9.2 million from the sale of 14,492,754 shares of Class A common stock and the same number of warrants.

The Company plans to continue to generate additional revenue (and improve cash flows from operations) combined with improved gross profit performance from the existing operating companies. The Company also may raise funds through debt financing, securing additional lines of credit, and the sale of shares in public or private offerings.

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Going Concern
The accompanying financial statements have been prepared on a going concern basis. While the working capital deficit of prior years has improved, and working capital of the Company is currently positive, continued operating losses causes doubt as to the ability of the Company to continue as a going concern. The Company's ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company's plan of operations, and its ultimate transition to profitable operations are necessary for the Company to continue. The uncertainity that exists with these factors raises substantial doubt about the Company's ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

In order to mitigate the risk related to the going concern uncertainty, the Company has a three-fold plan to resolve these risks. First, the operating subsidiaries of QCA, TDI, IDT and RCA plan to expand their revenues and profits yielding increased cash flow in those operating segments. This plan will allow for an increased level of cash flow to the Company. Second, the Company has expanded its credit facilities at the subsidiary level over the past 12 months to allow for greater borrowing accessibility if needed for the expansion of product lines and sales opportunities and plans to extend or refinance any lines of credit coming due over the next 12 months in order to provide additional financing. Finally, operating companies hard hit by the supply-chain related price increases such as Morris Sheet Metal, Alternative Laboratories, and Excel Construction have begun to experience an easing in the procurement and cost overruns of limited product supply. This subsequently has added to increased cash flow to those entities and less reliance on the Company to fund those activities. Although this plan is in place to mitigate the risk related to the going concern uncertainty, substantial doubt remains due to uncertainty around the growth projections and lack of control of many of the factors included in the Company's plan.

Entity level risks
The ultimate impact from COVID-19 on the Company’s operations and financial results during 2022 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 2022 and beyond. COVID-19 did have a negative impact on the Company’s financial performance in 2021. Our operations and performance may depend on global, regional, economic and geopolitical conditions. Russia’s invasion and military attacks on Ukraine have triggered significant sanctions from North American and European leaders. As of the date of this Report, those events were continuing to escalate and create increasingly volatile global economic conditions. Resulting changes in North American trade policy could trigger retaliatory actions by Russia, its allies and other affected countries, including China, resulting in a “trade war.” A trade war could result in increased costs for raw materials that we use in our manufacturing and could otherwise limit our ability to sell our products abroad. These increased costs would have a negative effect on our financial condition and profitability. Furthermore, the military conflict between Russia and Ukraine is increasing supply interruptions and further hindering our ability to find the materials we need to make our products. If the conflict between Russia and Ukraine continues for a long period of time, or if other countries become further involved in the conflict, we could face significant adverse effects to our business and financial condition. The Company is not able to fully quantify the impact that these factors will have on the Company’s financial results during 2022 and beyond.
Note 2 – Summary of Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries as of September 30, 2022 and December 31, 2021. 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, reserves for accounts receivable and inventory, valuation allowance for deferred tax assets, fair values assigned to intangible assets acquired, and impairment of long-lived assets. Actual results could differ significantly from our estimates. To the extent that there are material differences between
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these estimates and actual results, the Company’s future financial statement presentation, financial condition, results of operations and cash flows will be affected.
Impairment of Long-Lived Assets

The Company accounts for long-lived assets in accordance with the provisions of FASB Accounting Standards Codification (“ASC”) Topic 360, Accounting for the Impairment of Long-Lived Assets. This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when the estimated future cash flows from the use of the asset are less than the carrying amount of that asset.

During Q3, there was a triggering event related to the customer list for Alt Labs which required an analysis to be performed prior to the annual review. This analysis was performed in conjunction with a third-party valuation specialist. As a result of the analysis, it was determined that the value of the estimated future cash flows were greater than the carrying value of the reporting unit's assets. As such, no impairment was recognized during the nine months ended September 30, 2022.
Goodwill
In financial reporting, goodwill is not amortized, but is tested for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Events that result in an impairment review include significant changes in the business climate, declines in our operating results, or an expectation that the carrying amount may not be recoverable. We assess potential impairment by considering present economic conditions as well as future expectations. All assessments of goodwill impairment are conducted at the individual reporting unit level. As of September 30, 2022 and December 31, 2021, the reporting units with goodwill were QCA, Morris, Excel, Alt Labs, TDI, Identified Technology, ElecJet, and RCA.
Cash
Cash and cash equivalents consist of cash and short-term investments with original maturities of less than 90 days. As of September 30, 2022, and December 31, 2021, the Company had no cash equivalents.

The FDIC insures up to $250,000 per account with any excess amount in each account being uninsured. Total bank balances were $6,116,524 and $3,522,275, respectively, as of September 30, 2022, and December 31, 2021. Of this amount, $4,042,651 and $2,002,433 were uninsured. All uninsured amounts are held with J.P. Morgan Chase.
Major Customers
The Company had one customer, W.W. Grainger Inc., that made up 17% of accounts receivable as of September 30, 2022. The Company had no customer that made up over 10% of accounts receivable as of December 31, 2021.
For the nine months ended September 30, 2022, the Company had one customer, W.W. Grainger Inc., that made up 12% of total revenues. For the nine months ended September 30, 2021, the Company had one customer, Rivian Automotive, Inc., that made up 13% of total revenues.
For the nine months ended September 30, 2022, the Company had received 11% of total revenues from prime contractors.
Inventory
Inventory for all subsidiaries is valued at weighted average. Management compares the cost of inventory with its net realizable value and an allowance is made to write down inventory to net realizable value, if lower. Inventory is segregated
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into three areas, raw materials, work-in-process and finished goods. Inventory at September 30, 2022 and December 31, 2021, consists of:

September 30,
2022
December 31,
2021
Raw materials$8,685,568 $8,253,104 
Work in process2,500,893 2,480,979 
Finished goods13,796,125 13,685,571 
Inventory$24,982,586 $24,419,654 
Fair value measurements
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, 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.
We calculate the estimated fair value of a reporting unit using a combination of the income and market approaches. For the income approach, we use a discounted cash flow models developed in connection with our third-party valuation specialists that include the following assumptions, among others: projections of revenues, expenses, and related cash flows based on assumed long-term growth rates; and estimated discount rates. For the market approach, we use analyses based primarily on market comparables. We base these assumptions on historical data and experience, industry projections, and general economic conditions.
The carrying value of long-term debt approximates fair value since the related rates of interest approximate current market rates. As of September 30, 2022, and December 31, 2021, the Company had no financial assets or liabilities that were required to be fair valued on a recurring basis as all of our assets were Level 1.
Research and Development
The Company focuses on quality control and development of new products and the improvement of existing products. All cost related to research and development activities are expensed as incurred. During the nine months ended September 30, 2022 and 2021, research and development cost totaled $675,725 and $1,096,333, respectively.
Earnings (loss) per share
The Company presents both basic and diluted net income (loss) per share on the face of the consolidated statements of operations. Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted per share calculations give effect to all potentially dilutive shares of common stock outstanding during the period, including stock options and warrants, using the treasury-stock method. If antidilutive, the effect of potentially dilutive shares of common stock is ignored. The amount of anti-dilutive
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shares related to stock options and warrants for the three and nine months ended September 30, 2022 was 19,651,069. The following table illustrates the computation of basic and diluted earnings per share (“EPS”) for the three and nine months ended September 30, 2022 and 2021:
For the Three Months Ended September 30, 2022
For the Three Months Ended September 30, 2021
Net LossSharesPer Share AmountNet IncomeSharesPer Share Amount
Basic EPS
Net income (loss)$(4,764,370)197,768,559 $(0.02)$1,817,859 166,964,408 $0.01 
Effect of Dilutive Securities
Stock options and warrants— — — — 1,663,499 — 
Dilute EPS
$(4,764,370)197,768,559 $(0.02)$1,817,859 168,627,907 $0.01 
For the Nine Months Ended September 30, 2022
For the Nine Months Ended September 30, 2021
Net lossSharesPer Share AmountNet loss SharesPer Share Amount
Basic EPS
Net loss$(7,224,124)187,778,448 $(0.04)$(7,564,662)161,118,324 $(0.04)
Effect of Dilutive Securities
Stock options and warrants— — — — — — 
Dilute EPS
$(7,224,124)187,778,448 $(0.04)$(7,564,662)161,118,324 $(0.04)
Revenue Recognition
The Company recognizes revenue under ASC Topic 606, Revenue from contract with Customers ("Topic 606"). The following is a summary of the revenue recognition policy for each of the Company’s subsidiaries.
Revenue is recognized under Topic 606, at a point in time and over a period of time, in a manner that reasonably reflects the delivery of its services and products to customers in return for expected consideration and includes the following elements:
executed contract with the Company's customers that it believes are legally enforceable;
identification of performance obligations in the respective contract;
determination of the transaction price for each performance obligation in the respective contract;
allocation of the transaction price to each performance obligation; and
recognition of revenue only when the Company satisfies each performance obligation.

The following table presents our revenues disaggregated by type for the three and nine months ended September 30, 2022:

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Three Months Ended September 30, 2022
Construction ServicesManufacturingDefenseTechnologiesAerospaceTotal
Sale of goods$— $7,354,658 $— $11,581,471 $— $18,936,129 
Sale of services5,097,834 — 3,098,735 — 353,717 8,550,286 
Total revenues$5,097,834 $7,354,658 $3,098,735 $11,581,471 $353,717 $27,486,415 
Nine Months Ended September 30, 2022
Construction ServicesManufacturingDefenseTechnologiesAerospaceTotal
Sale of goods$— $23,533,228 $— $30,631,117 $— $54,164,345 
Sale of services14,823,297 — 8,258,923 — 1,103,130 24,185,350 
Total revenues$14,823,297 $23,533,228 $8,258,923 $30,631,117 $1,103,130 $78,349,695 

The following table presents our revenues disaggregated by type for the three and nine months ended September 30, 2021:

Three Months Ended September 30, 2021
Construction ServicesManufacturingDefenseTotal
Sale of goods$— $10,210,549 $— $10,210,549 
Sale of services5,465,881 — 1,721,886 7,187,767 
Total revenues$5,465,881 $10,210,549 $1,721,886 $17,398,316 
Nine Months Ended September 30, 2021
Construction ServicesManufacturingDefenseTotal
Sale of goods$— $21,506,262 $— $21,506,262 
Sale of services15,565,332 — 2,866,991 18,432,323 
Total revenues$15,565,332 $21,506,262 $2,866,991 $39,938,585 
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 discounts lease payments based on an estimate of its incremental borrowing rate.
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As of September 30, 2022, the future minimum finance and operating lease payments were as follows:
Twelve Months Ending September 30,
Finance
Leases
Operating
Leases
2023$1,923,293 $1,522,087 
20241,946,149 1,552,434 
20251,913,004 1,230,634 
20261,859,153 866,543 
20271,901,536 883,873 
Thereafter15,338,003 9,687,942 
Total payments24,881,138 15,743,513 
Less: imputed interest(9,392,600)(5,624,206)
Total obligation15,488,538 10,119,307 
Less: current portion(707,468)(858,994)
Non-current financing leases obligations$14,781,070 $9,260,313 
Finance Leases
As of September 30, 2022, all finance leases in the table above were related to property and equipment, and are included as part of property and equipment, net on the consolidated balance sheet. Of this amount, the book value related to buildings totaled $16,446,287, which had a remaining obligation of $15,082,152. The book value related to equipment totaled $790,800, which had a remaining obligation of $406,386. Depreciation expense associated with the finance leases within property and equipment was $938,863 for the nine months ended September 30, 2022, and is recorded within general and administrative expenses on the consolidated statement of operations. Interest expense on finance leases for the nine months ended September 30, 2022 was $946,241 and is recorded in interest expense on the consolidated statement of operations. At September 30, 2022, the weighted average remaining lease terms were 12.19 years, and the weighted average discount rate was 8.01%.
Operating Leases
The table below presents the operating lease related assets and liabilities recorded on the Company’s consolidated balance sheets as of September 30, 2022, and December 31, 2021:
Classification on Balance SheetSeptember 30,
2022
December 31,
2021
Assets 
Operating lease assetsOperating lease right of use assets$10,208,983 $1,460,206 
Total lease assets$10,208,983 $1,460,206 
Liabilities
Current liabilities
Operating lease liabilityCurrent operating lease liability$858,994 $428,596 
Noncurrent liabilities
Operating lease liabilityLong-term operating lease liability9,260,313 1,066,562 
Total lease liability$10,119,307 $1,495,158 

The operating lease expense for the nine months ended September 30, 2022, was $519,818, and is recorded within general and administrative expenses on the consolidated statement of operations. The cash paid under operating leases during the nine months ended September 30, 2022, was $645,065. At September 30, 2022, the weighted average remaining lease terms were 13.36 years, and the weighted average discount rate was 6.88%.
On June 23, 2022, the Company sold the building at 4740 S. Cleveland Ave. Fort Myers, Florida, for $13,200,000. The Company determined that it had transferred control of the building to the buyer, has derecognized the asset, and recognized
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a gain on the sale of $5,822,450 and paid off the outstanding mortgage of $4,642,043. The Company simultaneously entered into a sale leaseback transaction where the building was then leased back for a term of 15 years with monthly rent payments that range from $67,708 to $89,305. The Company determined the lease to be an operating lease and recognized a right-of-use asset and operating lease liability of $8,725,000 based on the present value of the minimum lease payments discounted using an incremental borrowing rate of 7%.
On June 26, 2022, the Company entered into a lease agreement, effective July 1, 2022, for the building being utilized by its subsidiary, Vayu. Under ASC 842, Leases, the Company determined the lease to be an operating lease and recognized a right-of-use asset and operating lease liability of $543,595 based on the present value of the minimum lease payments discounted using an incremental borrowing rate of 5% and a term of 3 years with monthly rent payments that range from $16,000 to $16,800.
Note 4 – Debt
The outstanding balances for the loans as of September 30, 2022, and December 31, 2021, were as follows:
September 30,
2022
December 31,
2021
Lines of credit, current portion$6,047,076 $4,473,489 
Equipment loans, current portion82,059 61,640 
Term notes, current portion3,125,295 5,628,884 
Total current 9,254,430 10,164,013 
Lines of credit, net of current portion8,941,526 5,640,051 
Long-term portion of equipment loans and term notes4,346,465 8,426,105 
Total notes payable and line of Credit$22,542,421 $24,230,169 
Future scheduled maturities of outstanding debt are as follows:
Twelve Months Ending September 30,
2023$9,254,430 
20243,986,235 
20251,675,770 
2026775,497 
20276,785,489 
Thereafter65,000 
Total$22,542,421 
In August 2020, the Company filed a lawsuit against Alan Martin regarding his note payable (see Note 8). As of September 30, 2022, the note had a balance of $2,857,500. In connection to this note, there is accrued interest of $1,082,718, and late fees of $722,007, both of which are reflected in accrued expenses on the consolidated balance sheets.
During 2022, the Company had four revolving lines of credit in the aggregate of $33.0 million, including one capital expenditures line of credit of $0.5 million. The revolving lines of credit used as of September 30, 2022, totaled $15.0 million with interest rates ranging from prime plus 2.50% - 4.25% and terms ranging from one to five years. Accounts receivables, inventory, and property and equipment are pledged as collateral on the various lines of credit. As of September 30, 2022, the Company had $2.1 million in additional funds available to borrow. The Company is required to maintain covenants including financial ratios as a condition of the line of credit agreements. As of the date of this Report, the Company was not in compliance with these covenants as the 10-Q report was not filed within 45 days from the quarter ended September 30, 2022. However, the Company received waivers which allows the covenant to be in compliance if the report is filed within 60 days. These waivers were then revised to extend through April 28th, 2023. As such, the Company will be in compliance with the covenants as of the date of this report.
In June 2022, the Company paid the outstanding principal balance of $2,374,061 on three notes payable due to the sellers of Morris Sheet Metal, Corp. that matured during the year.
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Note 5 – Stockholders' Equity
On November 29, 2021, the Company granted 983,636 continent shares of Class A common stock valued at $2,488,599 in connection with the ElecJet acquisition. These contingent shares represent equity compensation for post-acquisition services and are accounted for under ASC 718. Of this amount, 655,758 of the contingent shares valued at $1,659,063 are performance based and management determined the performance conditions were deemed not probable and as such no expense is recognized. The remaining 327,878 shares are a time-based award and is recognized based on the grant-date fair value of the shares of $829,536 over the vesting period of 3 years. As such, the Company recognized $69,128 and $230,427, respectively, of stock based compensation expense related to this award for the three and nine months ended September 30, 2022.
Common Stock
The Company had the following transactions in its common stock during the nine months ended September 30, 2022:
In January 2022, the Company issued 72,152 shares of Class A common stock for no additional consideration upon conversion of 10,149 shares of Series C Preferred Stock and 78,674 of Series D Preferred Stock.
On January 13, 2022, the Company amended the Corporation's Amended and Restated Certificate of Incorporation increasing the authorized capital stock from 195,000,000 to 295,000,000.
In March 2022, the Company issued 39,386 shares of Class A common stock for services with a value of $99,252.
In April 2022, the Company issued 171,850 shares of Class A common stock at a value of $132,325 as employee compensation.
During May and June 2022, the Company issued 76,119 shares of Class A common stock for cash of $55,144 in connection with a registered at-the-market offering (the "ATM Offering").
In July 2022, the Company sold 14,492,754 shares of Class A common stock and 14,492,754 warrants to certain investors, under a registered direct offering, for net proceeds of $9,175,000. The warrants have an exercise price of $0.69 per share and a term of 5 years.
In July 2022, the Company issued 60,600 shares of Class A common stock for cash of $42,318 in connection with its ATM offering.
In August 2022, certain investors exercised 1,449,276 warrants at an exercise price of $0.69, for net proceeds of $1,000,000.
In September 2022, certain shareholders converted 37,500 shares of Class C common stock into 37,500 shares of Class A common stock.
Stock Options
The following summarizes the stock option activity for the nine months ended September 30, 2022:
OptionsWeighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (in years)
Aggregate
Intrinsic
Value
Outstanding at December 31, 2021
1,790,000 $0.19 6.09$3,098,055 
Granted2,084,620 0.77 
Forfeited(643,722)0.32 
Exercised— — 
Outstanding at September 30, 2022
3,230,898 $0.54 8.16$538,390 
Vested and expected to vest at September 30, 2022
3,230,898 $0.54 8.16$538,390 
Exercisable at September 30, 2022
1,079,813 $0.14 5.62$491,374 
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The following table summarizes information about options outstanding and exercisable as of September 30, 2022:
Options OutstandingOptions Exercisable
Exercise
Price
Number
of Shares
Weighted
Average
Remaining
Life (in years)
Weighted
Average
Exercise
Price
Number
of Shares
Weighted
Average
Exercise
Price
$0.05 979,000 5.63$0.05 886,813 $0.05 
0.10 85,000 5.530.10 85,000 0.10 
0.77 2,058,898 9.590.77 — — 
0.90 108,000 4.520.90 108,000 0.90 
3,230,898 1,079,813 
During the nine months ended September 30, 2022 and 2021, stock option expense amounted to $58,406 and $31,933, respectively. Unrecognized stock option expense as of September 30, 2022, amounted to $1,312,637, which will be recognized over a period extending through April 2025.
During the nine months ended September 30, 2022, the Company issued 2,084,620 options in connection with the Company's 2021 Employee Equity Incentive Plan (the "Plan"). The options have an exercise price of $0.77, vest annually over a three year vesting period and expire on April 29, 2032.
The fair value of the 2,084,620 options issued in connection with the Plan is $1,534,401, and was determined using the Black-Scholes option pricing model with the following assumptions:

Stock price$0.77
Risk-free interest rate2.90%
Expected life of the options6.25 years
Expected volatility158%
Expected dividend yield0%
Warrants
The following summarizes the warrants activity for the nine months ended September 30, 2022:
WarrantsWeighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (in years)
Aggregate
Intrinsic
Value
Outstanding at December 31, 2021
5,527,778 $3.32 3.87$— 
Granted14,492,754 0.69 4.85— 
Forfeited— — — — 
Exercised(1,449,276)0.69 — — 
Outstanding at September 30, 2022
18,571,256 $1.47 4.56$— 
Vested and expected to vest at September 30, 2022
18,571,256 $1.47 4.56$— 
Exercisable at September 30, 2022
18,571,256 $1.47 4.56$— 
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The following table summarizes information about warrants outstanding and exercisable as of September 30, 2022:
Warrants OutstandingWarrants Exercisable
Exercise
Price
Number
of Shares
Weighted
Average
Remaining
Life (in years)
Weighted
Average
Exercise
Price
Number
of Shares
Weighted
Average
Exercise
Price
 
$6.60 416,667 2.39$6.60 416,667 $6.60 
2.52 396,825 2.192.52 396,825 2.52
3.10 4,285,715 4.153.10 4,285,715 3.10
3.08 428,571 4.153.08 428,571 3.08
0.6913,043,478 4.85$0.69 13,043,478 0.69
 18,571,256 18,571,256 

During the year ended December 31, 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, were exercisable as of August 16, 2021 and expire on February 16, 2025. The Company issued another 428,571 warrants to a placement agent in connection with the sale of its common stock. The warrants have an exercise price of $3.08, were exercisable as of May 26, 2022, and expire November 22, 2026. The Company issued another 396,825 warrants in connection with the RCA acquisition. The warrants have an exercise price of $2.52, were exercisable as of December 9, 2021, and expire December 9, 2024. During July 2022, the Company issued 14,492,754 warrants to certain investors in connection with the sale of its common stock. The warrants have an exercise price of $0.69, were exercisable as of July 13, 2022, and expire July 13, 2027.

The fair value of the 416,667, the 428,571, and the 396,825 warrants issued to the placement agent in connection with a registered direct offering, and to the RCA sellers in connection with the DTI/RCA acquisition (discussed below in Note 6) during the year ended December 31, 2021, are $2,498,637, $902,414, and $668,863 respectively, and was determined using the Black-Scholes option pricing model. The fair value of the 14,492,754 warrants issued to the placement agent during the nine months ended September 30, 2022, are $7,083,038, and was determined using the Black-Scholes option pricing model. All of these warrants were determined using the following assumptions:

Stock price
$0.62-$7.03
Risk-free interest rate
0.01%-1.02%
Expected life of the options
1.5-5 years
Expected volatility
157-347%
Expected dividend yield0%
The fair value of the warrants was recorded as offering costs with a corresponding credit to additional paid in capital.
Note 6 – Business Combinations
DTI Services (doing business as RCA Commercial Electronics) ("RCA")

On December 13, 2021, the Company purchased DTI Services (RCA), to add to its technology portfolio of companies. Under the provision of ASC 805 Business Combinations, the acquisition is considered an acquisition of a business since the Company is acquiring the outstanding capital of RCA and continuing the business of RCA. The company acquired 100% of specific RCA assets and liabilities. A summary of the finalized purchase price allocation at fair value is presented below:
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Purchase Allocation
Accounts receivable$3,409,230 
Other current assets1,259,556 
Inventory12,477,872 
Property and equipment761,370 
Customer list6,300,000 
Trademark620,000 
Non-compete agreement690,000 
Goodwill1,355,728 
ROU asset1,196,764 
Accounts payable(951,302)
Accrued expenses and other current liabilities(677,720)
Customer deposits(153,201)
Operating lease liability(1,226,128)
Line of credit(4,710,768)
$20,351,401 

The purchase price was paid as follows:

Cash$14,000,000 
Class A Common Stock (1,587,301 shares)
3,682,538 
Warrants (396,852 shares)
668,863 
Seller notes2,000,000 
$20,351,401 

For the nine months ended September 30, 2022, RCA earned $29.6M in revenue and had a net income of $432,782 that is reported on the consolidated statement of operations.

For tax purposes, the Goodwill will be deductible under IRC section 197, since the transaction was treated as an asset purchase.
The following are the unaudited pro forma results of operations for the three and nine months ended September 30, 2021, as if Vayu, TDI, Alt Labs, Identified Technologies, ElecJet, and RCA had been acquired on January 1, 2021. The pro forma results include estimates and assumptions which management believes are reasonable. However, pro forma results do not include any anticipated cost savings or other effects of the planned integration of these entities, and are not necessarily indicative of the results that would have occurred if the business combination had been in effect on the dates indicated.
Pro Forma Combined Financials (unaudited)
Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
Sales$27,297,565 $79,198,032 
Cost of goods sold19,884,795 56,469,197 
Gross profit7,412,770 22,728,835 
Operating expenses8,089,599 26,506,427 
Loss from operations(676,829)(3,777,592)
Net income (loss)3,490,541 (327,522)
Net income (loss) per share0.02 — 
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Note 7 – Segment Reporting

The Company discloses segment information that is consistent with the way in which management operates and views its business. Effective during the quarter ended September 30, 2022, the Company increased its reportable segments to eight segments as the financial performance of certain operating segments has diverged to no longer satisfy the segment reporting aggregation criteria. This segment created new reportable segments within the five silo’s previously disclosed by the Company as reportable segments. All segments and the subsidiaries within each segment are geographically located in North America. Each subsidiary that is siloed together is based upon similar products or product lines, customer base, selling and distribution characteristics, and other common attributes. As such, the financial results are logical to review in this manner for comparison, trend, deviations ,etc. purposes. These silos are then further disaggregated based on the segment reporting guidance as certain entities have different historical financial performance based on the historical financial characteristics and maturation of the business that was acquired.

Management excludes the following when reviewing the profit/loss by segment.
Intercompany Sales/COGS
Management fees to the parent Company
Income tax benefit/expense

There has not been any change to the measurement method in how management reviews the profit/loss by segment.

The operating segments and their business activity are as follows:

A4 Construction Services Morris Sheet Metal (“MSM”) provides commercial construction services primarily as a sheet metal contractor.

A4 Construction Services Excel Construction (“Excel”) provides commercial construction services primarily as a sheet metal contractor.

A4 Manufacturing Quality Circuit Assembly (QCA) is a contract manufacturer within the technology industry.

A4 Manufacturing Alternative Labs (“Alt Labs”) is a contract manufacturer within the dietary & nutraceutical supplements industry.

A4 Defense Thermal Dynamics does contracting for the US Government particularity for the US Defense Department and US Department of State.

A4 Technologies RCA Commercial Electronics (“RCA”) is a B2B commercial electronics manufacturer.

A4 Technologies ElecJet is a battery research & development company.

A4 Aerospace Varyu is a drone aircraft manufacturer.

A4 All Other includes the QCA-Central, Identified Technologies and Corporate operating segments.

The Company’s reportable segments for the three and nine months ended September 30, 2022, and September 30, 2021, and as of September 30, 2022, and December 31, 2021, were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenue
A4 Construction Services - MSM$4,641,335 $4,993,987 $13,735,021 $13,867,069 
A4 Construction Services - Excel456,499 471,890 1,088,276 1,698,263 
A4 Manufacturing - QCA4,006,665 4,188,957 12,566,907 11,696,926 
A4 Manufacturing - Alt Labs2,707,513 5,589,766 9,490,536 8,705,251 
A4 Defense - TDI3,098,735 1,721,886 8,258,923 2,866,991 
A4 Technologies - RCA11,477,833 — 29,625,368 — 
A4 Technologies - ElecJet103,638 — 1,005,749 — 
A4 Aerospace - Vayu— — 25,000 — 
All Other994,197 431,830 2,553,915 1,104,085 
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$27,486,415 $17,398,316 $78,349,695 $39,938,585 
Gross profit
A4 Construction Services - MSM$234,789 $519,050 $890,383 $955,569 
A4 Construction Services - Excel(171,476)159,652 (296,918)437,335 
A4 Manufacturing - QCA682,784 1,594,657 2,859,017 3,757,319 
A4 Manufacturing - Alt Labs555,918 1,498,352 2,315,394 2,878,248 
A4 Defense - TDI914,723 641,144 3,043,644 1,101,362 
A4 Technologies - RCA3,805,942 — 8,150,193 — 
A4 Technologies - ElecJet(92,494)— 94,774 — 
A4 Aerospace - Vayu— — 25,000 — 
All Other337,912 35,281 984,611 36,982 
$6,268,098 $4,448,136 $18,066,098 $9,166,815 
Income (loss) from operations
A4 Construction Services - MSM$(306,425)$(443,212)$(775,005)$(2,660,173)
A4 Construction Services - Excel(448,104)(164,582)(1,007,050)(804,154)
A4 Manufacturing - QCA(29,101)930,902 656,151 1,890,882 
A4 Manufacturing - Alt Labs(1,317,979)146,526 2,885,326 203,366 
A4 Defense - TDI336,401 (135,575)1,543,245 (131,953)
A4 Technologies - RCA1,635,201 — 2,394,868 — 
A4 Technologies - ElecJet(305,485)— (878,385)— 
A4 Aerospace - Vayu(911,805)(963,134)(2,538,133)(3,886,311)
All Other(2,544,722)(1,043,385)(7,557,431)(4,260,403)
$(3,892,019)$(1,672,460)$(5,276,414)$(9,648,746)
Depreciation and amortization
A4 Construction Services - MSM$171,960 $168,159 $509,706 $776,591 
A4 Construction Services - Excel67,525 72,807 200,442 218,423 
A4 Manufacturing - QCA105,573 94,244 314,356 280,111 
A4 Manufacturing - Alt Labs242,527 300,064 803,510 473,712 
A4 Defense - TDI72,338 87,322 216,518 143,539 
A4 Technologies - RCA270,300 — 610,399 — 
A4 Technologies - ElecJet103,532 — 308,665 — 
A4 Aerospace - Vayu258,871 222,291 792,765 448,659 
All Other279,158 233,918 833,879 510,934 
$1,571,784 $1,178,805 $4,590,240 $2,851,969 
Interest Expense
A4 Construction Services - MSM$98,811 $87,379 $326,056 $603,580 
A4 Construction Services - Excel$61,292 62,649 184,920 228,918 
A4 Manufacturing - QCA$78,269 73,599 202,159 176,387 
A4 Manufacturing - Alt Labs$200,285 382 351,962 622 
A4 Defense - TDI$— — — 825 
A4 Technologies - RCA$103,438 — 218,686 — 
A4 Technologies - ElecJet$— — — — 
A4 Aerospace - Vayu$4,448 (186,059)4,448 (489,823)
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All Other$509,144 313,873 1,338,891 2,215,860 
$1,055,687 $351,823 $2,627,122 $2,736,369 
Net income (loss)
A4 Construction Services - MSM$(403,258)$2,020,143 $(1,042,559)$151,779 
A4 Construction Services - Excel(509,396)(227,231)(1,191,970)(1,033,072)
A4 Manufacturing - QCA(148,902)1,417,547 386,728 2,288,976 
A4 Manufacturing - Alt Labs(1,512,864)472,402 2,673,865 529,001 
A4 Defense - TDI336,401 (120,481)1,543,245 (114,097)
A4 Technologies - RCA1,531,763 — 2,176,182 — 
A4 Technologies - ElecJet(305,413)— (881,858)— 
A4 Aerospace - Vayu(916,253)(777,075)(2,542,581)(3,396,497)
All Other(2,836,448)(967,446)(8,345,176)(5,990,752)
$(4,764,370)$1,817,859 $(7,224,124)$(7,564,662)
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As of
September 30, 2022
As of
December 31, 2021
Total Assets
A4 Construction Services - MSM$11,595,295 $10,935,355 
A4 Construction Services - Excel2,873,680 3,050,206 
A4 Manufacturing - QCA13,478,008 11,869,711 
A4 Manufacturing - Alt Labs25,453,935 23,173,298 
A4 Defense - TDI12,198,205 11,982,580 
A4 Technologies - RCA29,304,054 28,174,091 
A4 Technologies - ElecJet13,031,136 12,904,267 
A4 Aerospace - Vayu14,115,581 14,702,838 
All Other20,534,287 17,831,504 
$142,584,181 $134,623,850 
Goodwill
A4 Construction Services - MSM$113,592 $113,592 
A4 Construction Services - Excel— — 
A4 Manufacturing - QCA1,963,761 1,963,761 
A4 Manufacturing - Alt Labs4,410,564 4,410,564 
A4 Defense - TDI6,426,786 6,426,786 
A4 Technologies - RCA1,355,728 1,355,728 
A4 Technologies - ElecJet6,496,343 6,496,343 
A4 Aerospace - Vayu— — 
All Other1,913,310 1,913,310 
$22,680,084 $22,680,084 
Accounts receivable, net
A4 Construction Services - MSM$5,065,221 $3,906,271 
A4 Construction Services - Excel258,517 286,972 
A4 Manufacturing - QCA2,762,178 2,339,597 
A4 Manufacturing - Alt Labs873,108 406,333 
A4 Defense - TDI1,455,881 1,371,184 
A4 Technologies - RCA5,376,059 2,961,201 
A4 Technologies - ElecJet50,327 37,744 
A4 Aerospace - Vayu— — 
All Other616,192 565,874 
$16,457,483 $11,875,176 
Note 8 – Commitments and Contingencies
Licensing Agreement
DTI has entered into licensing agreements with RCA Trademark Management for the licensing rights to the respective trademarks in the United States of America and Canada.
The RCA licensing agreement was amended with Technicolor, S.A., as licensor and expires December 31, 2024. DTI agreed to pay a royalty fee of 2.5% on net sales of the licensed products with a minimum annual payment of $420,000 for
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the years ended 2020 and 2021, $440,000 for the year ended 2022, $460,000 for the year ended 2023, and $480,000 for the year ended 2024.
Warranty Service Agreement
DTI entered into a warranty service agreement to provide certain warranty services for a lighting supplier through December 31, 2024, except for one class of customer, for whom services will be provided through 2030. In exchange for these services, DTI receives annual payments as follows:
2023$66,626 
202459,964 
Total$126,590 

Royalty Agreement
On November 28, 2021, the Company entered into a Royalty Agreement with the sellers of ElecJet. In the Royalty Agreement, the Company noted that upon closing of the merger with ElecJet, the Company desired to build its initial factory (“Factory”) to manufacture batteries in the United States. The Company agreed to pay the sellers 1.5% of net sales for batteries produced by the Factory. Royalty payments shall continue to be paid for a period of ten years from the starting date, or until the total of the royalty payments equals $50 million, whichever occurs first.

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 August 2020, in a matter relating to the Company’s subsidiary Horizon Well Testing, LLC (“Horizon”), 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 dba Venture West Energy Services, LLC ("VWES"). The Company brought suit in 2020 seeking to avoid the claimed liability due from the Company to Alan Martin, for the Company’s 2017 purchase of Mr. Martin’s business, Horizon. On summary judgment, the court found that the Company’s claim was barred by a time-limiting clause for indemnification claims. The Company disagrees with the court’s ruling and intends to appeal. Before the Company can file its appeal of the summary judgment order, the court must resolve Mr. Martin’s counterclaim in which Mr. Martin claims that Mr. Martin remains unpaid on the promissory note, as modified, under which the Company purchased the Horizon. The note balance is alleged to have a principal sum due of $3.3 million, plus interest at 8% accruing from 2019 to present, plus late fees accruing at $575 per day (see note 4). The Company continues to dispute the amount claimed due. As well, the Company’s legal position remains that the indebtedness should be discharged due to material misrepresentations by Mr. Martin in the original transaction.
In October 2021, in a matter relating to the Company’s subsidiary Horizon Well Testing, LLC (“Horizon”), the Company received three complaints in the District Court of Oklahoma Country State of Oklahoma from former VWES employees Bruce Morse (CJ-2021-4316), Brian Hobbs (CJ-2021-4315), Thomas Karraker (CJ-2021-4314) for unjust enrichment, and breach of contract with respect to their employment contracts with Horizon. On January 19, 2022, the Company filed answers to all three lawsuits that denied these claims. The Company believes these are frivolous lawsuits. In July 2022, the Company and Mr. Morse settled his claims against the Company. The settlement included the cash payment of $24,375 for Mr. Morse's claimed 37,500 shares of Class A Common stock, and subsequently Mr. Morse’s case has been dismissed. Subsequently, a proposed settlement offer similar to the terms agreed to with Mr. Morse has been provided to Mr. Karraker, for which the Company is pending a response The Company has reached out to Mr. Hobbs to settle on terms similar to Mr. Morse but has not received a response and a formal proposal has not been sent.
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Note 9 – Subsequent Events
In October 2022, the Company's subsidiary, Vayu, entered into a four-year Supplier Agreement with a U.S. Government contractor for Vayu's Unmanned Aerial Vehicles ("UAVs") to be supplied to Africa for assistance in counter terrorism activities.
In October 2022, the Company entered into a lease in San Jose, California through March 1, 2033. The Company determined the lease to be an operating lease and recognized a right-of-use asset of and operating lease liability of $5,506,357 based on the present value of the minimum lease payments discounted using an incremental borrowing rate of 4%.
In November 2022, the Company received a complaint filed by Mr. Mark Bell in the district court of Idaho (CV42-22-4066) with regard to the Company’s February 2020 purchase of Excel Fabrication LLC (“Excel”) from Mr. Bell, over the Company’s refusal to continue paying on a $2,300,000 note comprising part of the purchase consideration. In December 2022 the Company counter-sued Mr. Bell for breach of contract, fraud, and misrepresentation in the February 2020 sale of Excel to the Company. The case is set for trial in June of 2024.
In December 2022, the Company’s subsidiary Excel Fabrication LLC (“Excel”) received a demand for binding arbitration (AAA Case No. 01-22-0004-9935) by Starr Corporation of Idaho, a contractor for whom Excel Fabrication LLC was performing as sub-contractor and who stopped its work for Starr Corporation pursuant to its claimed contract right of termination due to failure of Starr Corporation to make payment within the contracted period for payment for work satisfactorily performed. Starr Corporation claims that Excel’s termination was wrongful, and seeks approximately $500,000, reflecting its costs in having to complete work that was called for under the contract. Excel is seeking a determination that its termination was rightful under the terms of the contract between the parties, and in addition seeks payment on its unpaid billing submittals and additional costs. Arbitration hearings are scheduled to commence in April 2024.
In February 2023 the Company learned that a complaint the State of New York brought against Vayu in 2019 (prior to the Company’s ownership of Vayu) seeking a refund for two returned airframes, a case which had originally been dismissed for lack of jurisdiction, had become revived by virtue of New York’s highest court ruling (State of New York v Vayu, APL-2021-00148) that the State’s long arm statute applied to the 2016 transaction between Vayu and the State University of New York at Stonybrook. Total damages sought by the State of New York are less than $100,000, including interest and costs. The company is currently considering its options for reaching a settlement with the State of New York, and for the possibility of seeking redress from the previous owners of Vayu.
In April 2023, a certain investor converted 1.3 million shares of Class B common stock and 1 share of Class B preferred stock for 1,300,001 shares of Class A common stock.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on our financial condition, results of operations, and liquidity. This discussion and analysis should be read in conjunction with the unaudited Financial Statements and notes thereto for the nine months ended September 30, 2022, included under Item 1 – Financial Statements in this Quarterly Report, and our audited Financial Statements and notes thereto for the year ended December 31, 2021, contained in our Annual Report on Form 10-K/A. The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language at the beginning of this Quarterly Report regarding forward-looking statements.
Overview and Highlights
Company Background
Alpine 4 Holdings, Inc. (“we,” “our,” or the “Company”), was incorporated under the laws of the State of Delaware on April 22, 2014. We are a publicly traded conglomerate that is acquiring businesses that fit into its disruptive DSF business model of Drivers, Stabilizers, and Facilitators. At Alpine 4, we understand the nature of how technology and innovation can accentuate a business. Our focus is on how the adaptation of new technologies even in brick and mortar businesses can drive innovation. We also believe that our holdings should benefit synergistically from each other and that the ability to have collaboration across varying industries can spawn new ideas and create fertile ground for competitive advantages.
As of the date of this Report, the Company was a holding company that owned fourteen operating subsidiaries:
A4 Corporate Services, LLC;
ALTIA, LLC;
Quality Circuit Assembly, Inc.;
Morris Sheet Metal, Corp;
JTD Spiral, Inc.;
Excel Construction Services, LLC;
SPECTRUMebos, Inc.;
Vayu (US), Inc.;
Thermal Dynamics International, Inc.;
Alternative Laboratories, LLC.;
Identified Technologies Corporation;
ElecJet Corp.;
DTI Services Limited Liability Company (doing business as RCA Commercial Electronics); and
Global Autonomous Corporation.
In March 2021, the Company announced the combination of its subsidiaries Deluxe Sheet Metal, Inc. (Deluxe) and Morris Sheet Metal Corporation (Morris) to become one of the largest sheet metal contractors in the Midwest region of the United States. Both companies will be under the Morris Sheet Metal brand. The Company’s management believes that the combination of these businesses will create a more harmonious relationship between the two companies. The combining of resources should empower Morris to strengthen its brand through its strategic banking relationship, eliminate duplicative and competitive interests, and expand its footprint beyond the Indiana home base.
On May 5, 2021, the Company acquired all of the outstanding shares of stock of Thermal Dynamics International, Inc., a Delaware corporation (“Thermal Dynamics”).
On May 10, 2021, the Company acquired all of the outstanding membership interests of KAI Enterprises, LLC, a Florida limited liability company, the sole asset of which was all of the outstanding membership interests of Alternative Laboratories, LLC, a Delaware limited liability company (“Alt Labs”).
In June 2021, the Company announced the combination of its subsidiaries Impossible Aerospace (“IA”) and Vayu (US) (“Vayu US”) to become Vayu Aerospace Corporation (“Vayu”). The Company’s management believes that the combination of these businesses will create a more harmonious relationship between the two companies. The combining of
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resources should empower Vayu to strengthen its brand through its strategic banking relationship, eliminate duplicative and competitive interests, and expand its footprint beyond the Michigan home base.
On October 20, 2021, the Company, and the Company’s subsidiary, A4 Aerospace, Inc., a Delaware corporation (“A4 Aerospace”), entered into a Stock Purchase Agreement with Identified Technologies Corporation, a Delaware corporation with foreign registration in Pennsylvania (“Identified Technologies”). Pursuant to the Stock Purchase Agreement, A4 Aerospace purchased all of the outstanding shares of capital stock of Identified Technologies, a total of 6,486,044 shares of Identified Technologies’ capital stock (the “ITC Shares”). The total purchase price for the ITC Shares was $4,000,000 and was paid in shares of the Company’s Class A common stock, issued to the Shareholders. Following the closing of the transaction, A4 Aerospace owned 100% of the capital stock of Identified Technologies.
On November 29, 2021, the Company, and a newly formed and wholly owned subsidiary of the Company named ALPP Acquisition Corporation 3, Inc.(“AC3”), entered into a merger agreement with ElecJet Corp., a Delaware corporation (“ElecJet”) and the three ElecJet shareholders. Pursuant to the Agreement, AC3 merged with and into ElecJet, with ElecJet being the surviving entity following the merger.
On December 9, 2021, the Company, and A4 Technologies, Inc., a wholly owned subsidiary of the Company, entered into a Membership Interest Purchase Agreement with DTI Services Limited Liability Company (doing business as RCA Commercial Electronics), (“DTI”), Direct Tech Sales LLC, (also having an assumed business name of RCA Commercial Electronics), (“Direct Tech”), PMI Group, LLC, (“PMI”), Continu.Us, LLC, (“Continu.Us”), Solas Ray, LLC, (“Solas”), and the two individual owners of these entities. DTI, Direct Tech, PMI, Continu.Us, and Solas were referred to in the Membership Interest Purchase Agreement collectively as “RCA.” Pursuant to the Membership Interest Purchase Agreement, the Company acquired all of the outstanding membership interests of RCA.
Alpine 4 maintains our corporate office located at 2525 E. Arizona Biltmore Circle, Suite 237, Phoenix, Arizona 85016. ALTIA works out of the headquarters offices. QCA rents a location at 1709 Junction Court #380 San Jose, California 95112. 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. Vayu (US) has its headquarters at 3753 Plaza Drive, Ann Arbor, Michigan 48108. The headquarters for TDI are located at 14955 Technology Ct, Fort Myers, Florida 33912. Alt Labs has its headquarters at 4740 S. Cleveland Ave. Fort Myers, Florida 33907. The Identified Technologies Corporation headquarters are located at 6401 Penn Ave, Suite 211, Pittsburgh, Pennsylvania 15206. ElecJet has its headquarters at 5935 W 84th St, Indianapolis, Indiana 46278. RCA Commercial Electronics has its headquarters at 5935 W 84th St, Indianapolis, Indiana 46278. Global Autonomous Corporation has its offices at 2525 E Arizona Biltmore Circle, Suite 237, Phoenix Arizona 85016.
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.
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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:
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.
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Results of Operations
The following are the results of our operations for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.
Three Months Ended
September 30, 2022
Three Months Ended
September 30, 2021
$ Change
Revenue $27,486,415 $17,398,316 $10,088,099 
Cost of revenue21,218,317 12,950,180 8,268,137 
Gross Profit6,268,098 4,448,136 1,819,962 
Operating expenses:
General and administrative expenses10,186,857 5,539,465 4,647,392 
Research and development88,960 581,131 (492,171)
Gain on sale of property(115,700)— (115,700)
Total operating expenses10,160,117 6,120,596 4,039,521 
Loss from operations(3,892,019)(1,672,460)(2,219,559)
Other income (expenses)
Interest expense (1,055,687)(351,823)(703,864)
Gain on forgiveness of debt— 3,457,499 (3,457,499)
Other income (expense)(12,940)438,701 (451,641)
Total other income (expenses)(1,068,627)3,544,377 (4,613,004)
Income (loss) before income tax(4,960,646)1,871,917 (6,832,563)
Income tax expense (benefit)(196,276)54,058 (250,334)
Net income (loss)$(4,764,370)$1,817,859 $(6,582,229)
Revenue
Our revenues for the three months ended September 30, 2022, increased by $10,088,099 as compared to the three months ended September 30, 2021. In 2022, the increase in revenue was related to the RCA acquisition. Revenues for RCA for the three months ended September 30, 2022 was $11,477,833. The remaining decline in revenues is due to loss of major customers for Alt Labs.
Cost of revenue
Our cost of revenue for the three months ended September 30, 2022, increased by $8,268,137 as compared to the three months ended September 30, 2021. In 2022, the increase in cost of revenue is related to the acquisition of RCA. Cost of revenue for RCA was $7,671,891. The remaining increase in cost of revenues is related to increased pricing from supply chain shortage.
Operating expenses
Our operating expenses for the three months ended September 30, 2022, increased by $4,039,521 as compared to the three months ended September 30, 2021. The increase is due to the acquisition of RCA.
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Other income (expenses)
Other income for the three months ended September 30, 2022, decreased by $4,613,004 as compared to the same period in 2021. This decrease was primarily due to the gain on forgiveness of debt from the PPP loans forgiven in 2021. The increase in interest expense is due to interest incurred on the various lines of credit totaling $232,506 for the three months ended September 30, 2022.
The following are the results of our operations for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.
Nine Months Ended
September 30, 2022
Nine Months Ended
September 30, 2021
$ Change
Revenue $78,349,695 $39,938,585 $38,411,110 
Cost of revenue60,283,597 30,771,770 29,511,827 
Gross Profit18,066,098 9,166,815 8,899,283 
Operating expenses:
General and administrative expenses28,604,937 17,719,228 10,885,709 
Research and development675,725 1,096,333 (420,608)
Gain on sale of property(5,938,150)— (5,938,150)
Total operating expenses23,342,512 18,815,561 4,526,951 
Loss from operations(5,276,414)(9,648,746)4,372,332 
Other income (expenses)
Interest expense (2,627,122)(2,736,369)109,247 
Gain on extinguishment of debt— 803,079 (803,079)
Gain on forgiveness of debt— 3,617,241 (3,617,241)
Other income278,439 454,191 (175,752)
Total other income (expense)(2,348,683)2,138,142 (4,486,825)
Loss before income tax(7,625,097)(7,510,604)(114,493)
Income tax expense (benefit)(400,973)54,058 (455,031)
Net loss$(7,224,124)$(7,564,662)$340,538 
Revenue
Our revenues for the nine months ended September 30, 2022, increased by $38,411,110 as compared to the nine months ended September 30, 2021. In 2022, the increase in revenue was related to the acquisition of RCA. Revenues for RCA were $29,625,368. The remaining increase was due to the full year of operations for Alt Labs and TDI in 2022 compared to only five months of operations in 2021. The additional four months of operations in 2022 resulted in additional sales for Alt Labs and TDI of approximately $4.7 million and $3.1 million, respectively. The remaining operations remained relatively consistent between years.
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Cost of revenue
Our cost of revenue for the nine months ended September 30, 2022, increased by $29,511,827 as compared to the nine months ended September 30, 2021. In 2022, the increase in cost of revenue was related to the acquisition of RCA. Cost of revenue for RCA was $21,475,175. The remaining increase was due to the full year of operations for Alt Labs and TDI in 2022 compared to only five months of operations in 2021. The additional four months of operations in 2022 resulted in additional sales for Alt Labs and TDI of approximately $1.0 million and $1.1 million, respectively. The remaining increase in cost of revenues is related to increased pricing from supply chain shortage seen within the construction and manufacturing companies. The net result of the increase in our cost of revenue dollars in comparison to our revenue was an increase in our gross profit percentage from 23.0% during the first nine months ended September 30, 2021, to 23.1% in the first nine months ended September 30, 2022. The Company expects as supply chain constraints ease that gross profit will continue to rise.
Operating expenses
Our operating expenses for the nine months ended September 30, 2022, increased by $4,526,951 as compared to the nine months ended September 30, 2021. The increase is due to the acquisitions of RCA, Alt Labs, and TDI. Operating expenses for RCA was $5,755,325. General and administrative expenses also increased due to the full year of operations for Alt Labs and TDI in 2022 compared to only five months of operations in 2021. The increase in expenses was also offset by a $5.9 million gain on sale of property for the nine months ended September 30, 2022.
Other income (expenses)
Other income for the nine months ended September 30, 2022, decreased by $4,486,825 as compared to the same period in 2021 due to a combined $4.4 million gain on extinguished/forgiveness of debt during the nine months ended September 30, 2021.
Liquidity and Capital Resources

We have financed our operations since inception from existing revenue, the sale of common stock, capital contributions from stockholders and from the issuance of notes payable and convertible notes payable. We expect to continue to finance our operations from our current operating cash flow and by the selling shares of our common stock and or debt instruments. The Company raised $10 million in gross proceeds from the sale of 14,492,754 shares of Class A Common Stock and warrants to purchase 14,492,754 shared in a registered direct public offering that closed on July 13, 2022, the details of which are outlined in a Current Report on form 8-K filed by the Company on July 13, 2022. In August 2022, certain investors in the ATM Offering executed 1,449,276 warrants at an exercise price of $0.69 for cash proceeds to the Company of $1,000,000.
The Company also has bank lines of credit totaling $33.0 million as of December 31, 2022, of which $18.8 million was secured as of December 31, 2021. Additionally, the Company is monitoring additional businesses to acquire which management hopes will provide additional operating revenues to the Company. There can be no guarantee that the planned acquisitions will close or that they will produce the anticipated revenues on the schedule anticipated by management.
The Company also may elect to seek additional bank financing, engage in debt financing through a placement agent, or sell shares of its common stock in public or private offering transactions.
Off-Balance Sheet Arrangements
The Company has not entered into any transactions with unconsolidated entities whereby the Company has financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose the Company to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to the Company.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. Preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable. In many instances, we could
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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 and valuation 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, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. Management believes that there have been no changes in our critical accounting policies during the nine months ended September 30, 2022.
For a summary of our significant accounting policies, refer to Note 3 of our consolidated financial statements included under Item 8 – Financial Statements in our Annual Report on Form 10-K/A filed on March 17, 2023.
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 Internal Control over Financial Reporting
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report, September 30, 2022. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company's reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure.

Based upon that evaluation, as of the end of the period covered by this Report, the Company's management has 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: (i) inadequate segregation of duties and effective risk assessment; and (ii) inadequate control activities and monitoring processes over financial reporting. As a result of the restatement of certain of the Company’s publicly filed financial statements filed on March 17, 2023 and March 28, 2023, management concluded that there was an additional material weakness in the Company’s disclosure controls and procedures. (Please also see "Material Weaknesses in Internal Control over Financial Reporting" below.)
However, as discussed in our Annual Report for the year ended December 31, 2021, additional staff has been hired to address the issue of segregation of duties and the controls and monitoring processes. The Company is also in the process of switching ERP systems to provide greater IT controls over financial reporting. Management anticipates making significant progress to remediate these areas of material weakness in 2023 and has engaged a third-party specialty management consultant firm to help facilitate the process.
Changes in Internal Control over Financial Reporting
As discussed in more detail below, there is a material weaknesses in disclosure controls and procedures as well as a material weakness in internal control over financial reporting. There were no changes in our internal control over financial reporting during the quarter ended September 30, 2022, that would have remediated these material weakness. However, the Company has made significant efforts to remedy this in 2023.
Material Weaknesses in Internal Control Over Financial Reporting

A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

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As described in the December 31, 2021 10-K/A, there remains a material weakness around inadequate segregation of duties from a lack of accounting personnel and inherent system limitations of the current ERP system. Further some of the recent business combinations contained complex non-routine estimates and transactions that Management did not have the appropriate expertise to evaluate and account for, which resulted in material misstatements for the fiscal years ended December 31, 2020 and 2021, as well as a correction to the balance sheet for the periods ended March 31, 2022 and June 30, 2022 as noted in the Form 10-K/A file on March 17, 2023 and 10-Q/A filed on March 28, 2023.

Remediation

The Company is committed to remediating these material weaknesses as promptly as possible. In addition to the additional staff hired to aid in the material weakness over segregation of duties, as of the date of this Report, the Company was also in the process of switching ERP systems to provide greater IT controls over financial reporting. Management anticipates making significant progress to remediate these areas of material weakness in 2023 and has engaged a third-party specialty management consultant firm to help facilitate the process. Further, the Company has engaged a tax specialist CPA firm to assist with the preparation of the tax provision and other tax related items. These material weaknesses will not be deemed remediated until the remediation efforts described herein have been in place and tested and deemed to be designed, implemented and operating effectively. We plan for this to occur later in 2023.
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.
See Note 8 of Notes to Consolidated Financial Statements in Part I, Item 1 of this report.
Item 1A. Risk Factors
Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, includes a detailed discussion of the Company’s risk factors. However, many of the risk factors disclosed in Item 1A of our Annual Report may be further heightened or exacerbated by the impact of the COVID-19 pandemic.
Changes in general economic conditions, geopolitical conditions, domestic and foreign trade policies, monetary policies and other factors beyond our control may adversely impact our business and operating results.

Our operations and performance may depend on global, regional, economic and geopolitical conditions. Russia’s invasion and military attacks on Ukraine have triggered significant sanctions from North American and European leaders. These events are currently escalating and creating increasingly volatile global economic conditions. Resulting changes in North American trade policy could trigger retaliatory actions by Russia, its allies and other affected countries, including China, resulting in a “trade war.” A trade war could result in increased costs for raw materials that we use in our manufacturing and could otherwise limit our ability to sell our products abroad. These increased costs would have a negative effect on our financial condition and profitability. Furthermore, the military conflict between Russia and Ukraine may increase the likelihood of supply interruptions and further hinder our ability to find the materials we need to make our products. If the conflict between Russia and Ukraine continues for a long period of time, or if other countries become further involved in the conflict, we could face significant adverse effects to our business and financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuances in 2022
In January 2022, the Company issued 72,152 shares of Class A common stock for no additional consideration upon conversion of 10,149 shares of Series C Preferred Stock and 78,674 shares of Series D Preferred Stock.

The shares of Class A common stock issued upon conversion of the Series C and Series D Preferred Stock into Class A common stock were issued without registration under the 1933 Act in reliance on Section 4(a)(2) of the 1933 Act and the rules and regulations promulgated thereunder.
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In March 2022, the Company issued 39,386 shares of Class A Common Stock to management in connection with the acquisition of DTI Services Limited Liability Company.

The shares of Class A common stock referenced above that were issued in connection with the acquisition of DTI Services 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 29, 2022, the Company issued 171,850 shares of Class A at a value of $132,325 as employee compensation.

The shares of Class A common stock referenced above 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.

Purchases of equity securities by the issuer and affiliated purchasers

No purchases of the Company's equity securities were made by the Company or any affiliated purchasers during the nine months ended September 30, 2022.
Item 6. Exhibits.
Exhibit NumberDescription
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).
2.3
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).
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10.6
Form of Placement Agent Agreement (incorporated by reference to Exhibit 10.2 to Alpine 4’s Current Report on Form 8-K filed February 12, 2021).
10.7
Stock Purchase Agreement by and among A4 Defense Services, Inc., Thermal Dynamics International, Inc., Page Management Co., Inc., and Stephen L. Page (previously filed as Exhibit 10.1 to the Company’s Current Report filed on May 4, 2021, and incorporated herein by reference).
10.8
Membership Interest Purchase Agreement by and among A4 Manufacturing, Inc., Alpine 4 Holdings, Inc., Alternative Laboratories, LLC, KAI Enterprises, LLC, and Kevin Thomas (previously filed as Exhibit 10.1 to the Company’s Current Report filed on May 10, 2021, and incorporated herein by reference).
10.9
Commercial Lease Agreement by and between 4740 Cleveland, LLC, and Alternative Laboratories, LLC (previously filed as Exhibit 10.4 to the Company’s Current Report filed on May 10, 2021, and incorporated herein by reference).
10.10
Membership Interest Purchase Agreement by and among A4 Manufacturing, Inc., Alpine 4 Holdings, Inc., 4740 Cleveland, LLC, and Kevin Thomas (previously filed as Exhibit 10.5 to the Company’s Current Report filed on May 10, 2021, and incorporated herein by reference).
10.11
Identified Technologies Corporation Stock Purchase Agreement, dated October 20, 2021 (previously filed as Exhibit 10 to the Company’s Current Report filed on October 25, 2021, and incorporated herein by reference).
10.12
31.1
31.2
32.1
32.2
101 INSXBRL Instance Document*
101 SCHXBRL Schema Document*
101 CALXBRL Calculation Linkbase Document*
101 DEFXBRL Definition Linkbase Document*
101 LABXBRL Labels Linkbase Document*
101 PREXBRL 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
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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.
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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: April 25, 2023
By:/s/ Kent B. Wilson
Kent B. Wilson
Chief Executive Officer
(Principal Executive Officer)
By:/s/ SaVonnah Osmanski
SaVonnah Osmanski
Interim Chief Financial Officer
(Interim Principal Financial Officer)
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