ALPINE 4 HOLDINGS, INC. There are statements in this Report that are not historical facts. These "forward-looking statements" can be identified by use of terminology such as "believe," "hope," "may," "anticipate," "should," "intend," "plan," "will," "expect," "estimate," "project," "positioned," "strategy" and similar expressions. You should be aware that these forward-looking statements are subject to risks and uncertainties that are beyond our control. For a discussion of these risks, you should read this entire Report carefully, especially the risks discussed under "Risk Factors." Although management believes that the assumptions underlying the forward-looking statements included in this Report are reasonable, they 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, 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.
Overview and Highlights Company Background
As of the date this Report was filed, the Company was a holding company that
owned seven operating subsidiaries:
Business Strategy What We Do:
It is our mandate to grow
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between
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
Facilitators: Facilitators are our "secret sauce". Facilitators are companies
that provide a product or service that an
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.
[[Image Removed: Picture 1]] 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.
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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.
Going Concern
The accompanying financial statements have been prepared on a going-concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has incurred losses
since inception and had accumulated a deficit of
The management of
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Results of Operations
The following are the results of our operations for the three months ended
Three Months Ended Three Months Ended
September 30, 2020 September 30, 2019 $ Change
Revenue $ 8,729,633 $ 7,088,182 $ 1,641,451
Cost of revenue 7,390,406 5,311,323 2,079,083
Gross Profit 1,339,227 1,776,859 (437,632)
Operating expenses:
General and
administrative expenses 1,911,278 1,739,867 171,411
Total operating
expenses 1,911,278 1,739,867 171,411
Loss from operations (572,051) 36,992 (609,043)
Other income (expenses)
Interest expense (1,139,462) (698,844) (440,618)
Change in value of
derivative liabilities - 3,389,116 (3,389,116)
Gain on extinguishment of
debt 253,063 - 253,063
Bargain purchase gain 64,371 - 64,371
Other income (5,783) 77,918 (83,701)
Total other expenses (827,811) 2,768,190 (3,596,001)
Loss before income tax (1,399,862) 2,805,182 (4,205,044)
Income tax expense - - -
Net loss $ (1,399,862) $ 2,805,182 $ (4,205,044)
Revenue
Our revenues for the three months ended
Cost of revenue
Our cost of revenue for the three months ended
Operating expenses
Our operating expenses for the three months ended
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Other expenses
Other expenses for the three months ended
The following are the results of our operations for the nine months ended
Nine Months Ended Nine Months Ended
September 30, 2020 September 30, 2019 $ Change
Revenue $ 26,608,093 $ 20,690,014 $ 5,918,079
Cost of revenue 21,553,106 15,542,194 6,010,912
Gross Profit 5,054,987 5,147,820 (92,833)
Operating expenses:
General and administrative
expenses 7,225,280 5,509,996 1,715,284
Impairment loss of
intangible asset and
goodwill 1,111,600 - 1,111,600
Total operating expenses 8,336,880 5,509,996 2,826,884
Loss from operations (3,281,893) (362,176) (2,919,717)
Other income (expenses)
Interest expense (3,694,531) (2,736,968) (957,563)
Change in value of
derivative liabilities 2,298,609 (689,369) 2,987,978
Gain on extinguishment of
debt 344,704 - 344,704
Change in fair value of
contingent consideration 500,000 - 500,000
Bargain purchase gain 64,371 - 64,371
Other income 56,352 206,681 (150,329)
Total other expenses (430,495) (3,219,656) 2,789,161
Loss before income tax (3,712,388) (3,581,832) (130,556)
Income tax expense - - -
Loss from continuing
operations (3,712,388) (3,581,832) (130,556)
Discontinued operations - 2,419,849 (2,419,849)
Net loss $ (3,712,388) $ (1,161,983) $ (2,550,405)
Revenue
Our revenues for the nine months ended
Cost of revenue
Our cost of revenue for the nine months ended
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Operating expenses
Our operating expenses for the nine months ended
Other expenses
Other expenses for the nine months ended
Discontinued operations
In
VWES has been presented as discontinued operations in the accompanying consolidated financial statements.
As of
Liquidity and Capital Resources
We have financed our operations since inception from the sale of common stock, capital contributions from stockholders and from the issuance of notes payable and convertible notes payable. We expect to continue to finance our operations from our current operating cash flow and by the selling shares of our common stock and or debt instruments.
In April and
Management expects to have sufficient working capital for continuing operations from either the sale of its products or through the raising of additional capital through private offerings of our securities. Additionally, the Company is monitoring additional businesses to acquire which management hopes will provide additional operating revenues to the Company. There can be no guarantee that the planned acquisitions will close or that they will produce the anticipated revenues on the schedule anticipated by management.
The Company also may elect to seek bank financing or to engage in debt financing through a placement agent. If the Company is unable to raise sufficient capital from operations or through sales of its securities or other means, we may need to delay implementation of our business plans.
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 financial statements have been prepared in accordance with accounting
principles generally accepted in
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For a summary of our critical accounting policies, refer to Note 2 of our unaudited consolidated financial statements included under Item 1 - Financial Statements in this Form 10-Q.
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