ALPINE 4 HOLDINGS, INC. Item 3.02 Unregistered Sales of
Business Holding Company Acquisition
On
The Closing Date of the Transaction occurred on
The Company filed a Current Report on Form 8-K on
Item 9.01 Financial Statement and Exhibits.
(a)Financial Statements of businesses or funds acquired.
(b)Pro Forma Financial Information
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Alternative Laboratories, LLC Financial Statements Contents Page Financial Statements: Report of Independent Registered Public Accounting Firm F-1 Balance Sheets as ofDecember 31, 2020 and 2019 F-2
Statements of Operations for the Years Ended
Statements of Changes in Member's Equity for the Years Ended
Statements of Cash Flows for the Years Ended
Notes to Financial Statements F-6
Balance Sheets as of
Statements of Operations for the Three Months Ended
Statements of Changes in Member's Equity for the Three Months Ended March F-15 31, 2021 and 2020 - unaudited
Statements of Cash Flows for the Three Months Ended
Notes to the Unaudited Financial Statements F-17 Unaudited Pro Forma Consolidated Financial Statements F-20 Signatures F-25
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Member of
Alternative Laboratories, LLC Opinion on the Financial Statements
We have audited the accompanying balance sheets of
Basis for Opinion
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the Company's financial
statements based on our audits. We are a public accounting firm registered with
the
We conducted our audits in accordance with the standards of the PCAOB and in
accordance with auditing standards generally accepted in
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/MaloneBailey, LLP www.malonebailey.com
We have served as the Company's auditor since 2021.
--------------------------------------------------------------------------------
F-1
--------------------------------------------------------------------------------
ALTERNATIVE LABORATORIES, LLC
BALANCE SHEETS
December 31, December 31,
2020 2019
ASSETS
CURRENT ASSETS:
Cash $ 1,633,347 $ 3,199,954
Accounts receivable, net 1,054,460 3,506,287
Inventory, net 2,641,411 3,547,843
Prepaid expenses and other current assets 151,856 162,656
Total current assets 5,481,074 10,416,740
Property and equipment, net 5,172,595 3,961,960
Other non-current assets 27,483 10,601
TOTAL ASSETS $ 10,681,152 $ 14,389,301 LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 333,431 $ 699,820
Accrued expenses 65,428 300,340
Contract liabilities 1,727,684 27,269
Notes payable, current portion 573,724 347,603
Due to related party 62,755 -
Capital lease obligation, current portion 5,534 6,789
Total current liabilities 2,768,556 1,381,821
Notes payable, net of current portion 294,259 -
Capital lease obligations, net of current portion 14,048 19,582
TOTAL LIABILITIES 3,076,863 1,401,403
Member's Equity
Member's capital 1,549,240 1,549,240
Retained earnings 6,055,049 11,438,658
Total Member's Equity 7,604,289 12,987,898
TOTAL LIABILITIES AND MEMBER'S EQUITY $ 10,681,152 $ 14,389,301
The accompanying notes are an integral part of these financial statements.
--------------------------------------------------------------------------------
F-2
--------------------------------------------------------------------------------
ALTERNATIVE LABORATORIES, LLC
STATEMENTS OF OPERATIONS
Years Ended December 31,
2020 2019
Revenues, net $ 18,268,854 $ 43,776,499
Cost of goods sold 12,039,265 25,971,141
Gross Profit 6,229,589 17,805,358
Operating expenses:
General and administrative expenses 3,059,774 4,795,272
Income from operations 3,169,815 13,010,086
Other income (expenses)
Other income (expense) 36,276 221,059
Net Income $ 3,206,091 $ 13,231,145 The accompanying notes are an integral part of these financial statements.
--------------------------------------------------------------------------------
F-3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ALTERNATIVE LABORATORIES, LLC
STATEMENTS OF CHANGES IN MEMBER'S EQUITY
Retained Earnings Total
Member's Capital Member's Equity
Balance, December 31, 2018 $ 1,449,240 $ 3,775,319 $ 5,224,559
Distributions to member - (5,567,806) (5,567,806)
Noncash contributions 100,000 - 100,000
Net income - 13,231,145 13,231,145
Balance, December 31, 2019 1,549,240 11,438,658 12,987,898
Distributions to member - (8,589,700) (8,589,700)
Net income - 3,206,091 3,206,091
Balance, December 31, 2020 $ 1,549,240 $ 6,055,049 $ 7,604,289
The accompanying notes are an integral part of these financial statements.
--------------------------------------------------------------------------------
F-4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ALTERNATIVE LABORATORIES, LLC
STATEMENTS OF CASH FLOWS
Years Ended December 31,
2020 2019
OPERATING ACTIVITIES:
Net income $ 3,206,091 $ 13,231,145
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 556,761 209,824
Bad debts 8,405 5,220
Gain on disposal of equipment (499,965) -
Inventory reserve 157,324 105,556
Changes in current assets and liabilities:
Accounts receivable 2,443,422 (2,063,246)
Inventory 749,108 (1,599,395)
Prepaid expenses and other assets (6,082) 232,958
Accounts payable (366,389) 77,793
Accrued expenses (234,912) 253,267
Due to related party 62,755 -
Contract liabilities 1,700,415 18,911
Net cash provided by operating activities 7,776,933 10,472,033
INVESTING ACTIVITIES:
Proceeds from sale of equipment 803,389 -
Additions to property and equipment (2,049,231) (3,268,064)
Net cash used in investing activities (1,245,842) (3,268,064)
FINANCING ACTIVITIES:
Proceeds from PPP loan 849,793 -
Repayments of capital lease obligation (6,789) (11,530)
Repayments of notes payable (3,399) -
Repayments of notes payable, related party (347,603) -
Distribution to member (8,589,700) (5,567,806)
Net cash used in financing activities (8,097,698) (5,579,336)
NET INCREASE (DECREASE) IN CASH (1,566,607) 1,624,633
CASH, BEGINNING OF YEAR 3,199,954 1,575,321
CASH, END OF YEAR $ 1,633,347 $ 3,199,954
CASH PAID FOR:
Interest $ 8,477 $ 9,158
Income taxes $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Financed property and equipment $ 21,589 $ 24,945
Unpaid additions to property and equipment $ - $ 128,298
Due to related party contributed to capital $ - $ 100,000
The accompanying notes are an integral part of these financial statements.
--------------------------------------------------------------------------------
F-5
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
For the Years Ended
--------------------------------------------------------------------------------
Note 1 - Organization and Basis of Presentation
Basis of presentation
The accompanying financial statements present the balance sheets, statements of
operations, changes in member's equity and cash flows of the Company. The
financial statements have been prepared in accordance with generally accepted
accounting principles in
Note 2 - Summary of Significant Accounting Policies
Use of estimates
The financial statements are prepared in accordance with generally accepted
accounting principles in
Cash and cash equivalents
Cash and cash equivalents consist of cash and short-term investments with
original maturities of less than 90 days. As of
Major Customers
For the years ended
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:
--------------------------------------------------------------------------------
F-6
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
For the Years Ended
--------------------------------------------------------------------------------
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, and notes payable. 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.
As of
Accounts Receivable
The Company maintains reserves for potential credit losses on accounts
receivable. Management reviews the composition of accounts receivable and
analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. Reserves are recorded primarily on a
specific identification basis. As of
Inventory
Inventory is valued at the lower of cost or net realizable value, cost being
determined using the weighted average method. 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 into three
areas, raw materials, work-in-process and finished goods. Inventory, net at
December 31, December 31,
2020 2019
Raw materials $ 2,524,223 $ 3,377,399
Work in process 188,169 276,000
Finished goods 191,900 -
2,904,292 3,653,399
Reserve for inventory (262,881) (105,556)
Inventory, net $ 2,641,411 $ 3,547,843
Long-lived Assets
We periodically evaluate the carrying value of long-lived assets to be held and
used when events and circumstances indicate that the carrying amount of an asset
may not be recovered. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell. We did not recognize any impairment losses during the years ended
--------------------------------------------------------------------------------
F-7
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
For the Years Ended
--------------------------------------------------------------------------------
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation. Depreciation and amortization are recorded using the straight-line method over the estimated useful lives of the assets, which range from five years to 15 years as follows:
Automobiles & Trucks 5 years
Machinery and equipment 5 years
Leasehold Improvements 15 years or time remaining on lease (whichever is
shorter)
Maintenance and repair costs are charged to expense as incurred. Significant improvements or betterments are capitalized and depreciated over the remaining life of the related asset.
Property and equipment consisted of the following as ofDecember 31, 2020 and 2019: December 31, December 31, 2020 2019 Automobiles and trucks$ 67,712 $ 67,712 Machinery and equipment 2,276,997 2,631,152 Office furniture and fixtures 68,078 54,109 Computer and software 65,084 65,084 Leasehold improvements 4,267,350 3,218,354
Total Property and equipment 6,745,221 6,036,411
Less: Accumulated depreciation (1,572,626) (2,074,451)
Property and equipment, net
Depreciation expense for the years ended
In August of 2020, the Company ceased occupying the
Income Taxes
A limited liability company is a flow through entity for income tax purposes and as such earnings or losses flow through to the members income tax returns. Accordingly, the Company does not incur income tax obligations and the financial statements do not include a provision for income taxes.
Revenue Recognition
On
Revenue is recognized under Topic 606 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:
--------------------------------------------------------------------------------
F-8
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
For the Years Ended
--------------------------------------------------------------------------------
·contracts with the Company's customers in the form of purchase orders, supply agreements and documented master formula sign off sheets;
·identification of performance obligations in the respective contract;
·determination of the transaction price for each performance obligation in the respective contract;
·allocation the transaction price to each performance obligation; and
·recognition of revenue only when the Company satisfies each performance obligation.
The Company recognizes revenues for finished goods at the time the goods are shipped. Included in the revenues recognized at the time the finished goods are shipped are fees for potency testing, microbiological testing, reimbursement for shipping costs when paid by the Company, and other miscellaneous fees associated with the finished goods. The Company has the right to payment for the goods when the order ships from the warehouse, at this control of the goods transfers to the customer.
Typically, a fifty percent deposit for the contractual obligation is required
from the customer prior to activating the order in the system. These deposits
are held on the balance sheet in the contract liability account. This liability
account is reduced and applied to invoices once the product to which the deposit
relates is shipped. As of
Related Parties
The Company has historically engaged in and may continue to engage in certain business transactions with related parties (See Note 3). Transactions involving related parties cannot be presumed to be carried out on an arm's length basis due to the absence of free market forces that naturally exist in business dealings between two or more unrelated entities. Related party transactions may not always be favorable to our business and may include terms, conditions and agreements that are not necessarily beneficial to or in best interest of our company.
Leases
The
Research and Development Costs
The Company focuses on quality control and development of new science-based . . .
© Edgar Online, source
