10-K 1 alpine.htm 10K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
[X]
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2018
   
[   ]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from _______ to __________

Commission file number:  000-55205


Alpine 4 Technologies Ltd.
(Exact name of registrant as specified in its charter)

Delaware
46-5482689
(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: 855-777-0077 ext 801

 (Former name, former address and former fiscal year, if changed since last report)

Securities Registered pursuant to Section 12(b) of the Act: None

Securities Registered pursuant to Section 12(g) of the Act: Class A Common Stock, $0.0001 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes   No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes No

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        No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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        No

Indicate by check mark if disclosure of delinquent filings pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
   
Emerging Growth Company
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes        No
 
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.  As of June 30, 2018, the aggregate market value of the voting and non-voting common equity held by non-affiliates, computed based on the average bid and asked price of the Class A common stock, was $2,257,363.
 
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:  As of March 31, 2019, the issuer had 26,567,410 shares of its Class A common stock issued and outstanding and 5,000,000 shares of its Class B common stock issued and outstanding.


DOCUMENTS INCORPORATED BY REFERENCE

None.


ALPINE 4 TECHNOLOGIES LTD.
FISCAL YEAR ENDED DECEMBER 31, 2016
ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS
 
PART I
 
Page
 
 
 
 
 
ITEM 1.
BUSINESS
3
 
       
ITEM 1A.
RISK FACTORS
9
 
       
ITEM 1B.
UNRESOLVED STAFF COMMENTS
15
 
       
ITEM 2.
PROPERTIES
15
 
       
ITEM 3.
LEGAL PROCEEDINGS
15
 
       
ITEM 4.
MINE SAFETY DISCLOSURES
16
 
       
PART II
     
       
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
16
 
       
ITEM 6.
SELECTED FINANCIAL DATA
20
 
       
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
20
 
       
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
24
 
       
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
24
 
       
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
24
 
       
ITEM 9A.
CONTROLS AND PROCEDURES
24  
       
ITEM 9B.
OTHER INFORMATION
25  
       
PART III
     
       
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
26  
       
ITEM 11.
EXECUTIVE COMPENSATION
28  
       
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
28  
       
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
30  
       
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
30  
       
PART IV
     
       
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
30  
       
SIGNATURES
  60  


2


PART I

Special Note Regarding Forward-Looking Statements
 
Information included or incorporated by reference in this Annual Report on Form 10-K contains forward-looking statements. All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. Forward-looking statements may contain the words "believes," "project," "expects," "anticipates," "estimates," "forecasts," "intends," "strategy," "plan," "may," "will," "would," "will be," "will continue," "will likely result," and similar expressions, and are subject to numerous known and unknown risks and uncertainties. Additionally, statements relating to implementation of business strategy, future financial performance, acquisition strategies, capital raising transactions, performance of contractual obligations, and similar statements may contain forward-looking statements. In evaluating such statements, prospective investors and shareholders should carefully review various risks and uncertainties identified in this Report, including the matters set forth under the captions "Risk Factors" and in the Company's other SEC filings. These risks and uncertainties could cause the Company's actual results to differ materially from those indicated in the forward-looking statements. The Company disclaims any obligation to update or publicly announce revisions to any forward-looking statements to reflect future events or developments.
 
Although forward-looking statements in this Annual Report on Form 10-K reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading "Risk Factors Related to Our Business" below, as well as those discussed elsewhere in this Annual Report on Form 10-K. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We file reports with the Securities and Exchange Commission ("SEC"). You can read and copy any materials we file with the SEC at the SEC's Public Reference Room, 100 F. Street, NE, Washington, D.C. 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
 
We disclaim any obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report on Form 10-K. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this Annual Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

ITEM 1.   BUSINESS.

Our Business

Company Background and History

Alpine 4 Technologies Ltd. (“Alpine 4,” the “Company,” “we,” or “our”) was incorporated under the laws of the State of Delaware on April 22, 2014.  The Company was formed to serve as a vehicle to effect an asset acquisition, merger, exchange of capital stock, or other business combination with a domestic or foreign business.  As of the date this Report was filed, the Company was a holding company that owned five operating subsidiaries: ALTIA, LLC; Quality Circuit Assembly, Inc.; American Precision Fabricators, Inc.; Morris Sheet Metal, Corp; and JTD Spiral, Inc. (As discussed in more detail below, we previously had an additional subsidiary, Venture West Energy Services (formerly Horizon Well Testing, LLC). However, as of December 31, 2018, we discontinued operations on this company and in February 2019 filed for Chapter 7 bankruptcy.

3

Who We Are

Alpine 4 is a publicly held enterprise with four principles at the core of its business: Synergy, Innovation, Drive, and Excellence (S.I.D.E.).  At Alpine 4, we believe synergistic innovation drives excellence. By anchoring these words to our combined experience and capabilities, we are able to aggressively pursue opportunities within and across vertical markets. We deliver solutions that not only drive industry standards, but also increase value for our shareholders.
 
Driver, Stabilizer, Facilitator (DSF)
 
At the heart of our acquisition model is our focus on what we call DSF, which stands for Driver, Stabilizer, Facilitator.

Driver are companies that are in emerging markets or technologies, have large upside potential for revenue and profits, and a large market opportunity to access.  These types of acquisitions are typically small, brand new companies that need structure that can support their growth.
 
Stabilizers are companies that have returning or “sticky” customers and consistent revenue, and that can provide solid net profit returns to Alpine 4.
 
Facilitators are our “secret sauce.”  We believe that 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 do not have.
 
The following diagram shows how we view our various subsidiaries as drivers, facilitators, and stabilizers:
 

 

At Alpine 4, we understand how technology and innovation can accentuate a business. We strive to develop strategic synergies between our holdings to create value and operational excellence within a unique long-term perspective.

4

Our Strategy

Alpine 4’s strategy is to provide Fortune 500-level execution strategies in its subsidiary companies and market segments to businesses and companies that have the most to benefit from this access.

Alpine 4 feels this opportunity exists in smaller middle market operating companies with revenues between $5 and $150 million.  In this target rich environment, we believe that businesses generally sell at more reasonable multiples, presenting greater opportunities for operational and strategic improvements and have greater potential for growth.   Implementation of our strategy within our holdings is accomplished by the offering of strategic and tactical MBA-level training and development, delivered via the following modules:

Alpine 4 Mini MBA program; and
   
An Alpine 4 developed ERP (Enterprise Resource Planning system) and collaboration system called SPECTRUMebos.  SPECTRUMebos is an Enterprise Business Operating System (ebos).  This system will combine the key technology software components of Accounting and Financial Reporting, an Enterprise Resource Planning System (ERP), a Document Management System (DMS), a Business Intelligence (BI) platform and a Customer Resource Management (CRM) hub which will be tethered to management reporting and collaboration toolsets. Management believes that these tools will help drive real-time information in two directions: first, to the front lines by empowering customer-facing stakeholders; and second, back to management for planning, problem solving, and integration.   Management believes that SPECTRUMebos will be the technology “secret sauce” in managing our portfolio of companies and, in time, may be offered to external customers.

Diversification

It is our goal to help drive Alpine 4 into a leading, multi-faceted holding company with diverse products and services that not only benefit from one another as 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.   Alpine 4 has been set up with a holding company model, with Presidents who will run each subsidiary business, and Managers with specific industry related experience who, along with Kent Wilson, the CEO of Alpine 4, will help guide our portfolio of companies as needed.  Alpine 4 will work with our Presidents and Managers to ensure that our core principles of Synergy, Innovation, Drive, Excellence are implemented and internalized.  Further, we plan to work with our subsidiaries and capital partners to provide the proper capital allocation and to work to make sure each business is executing at high levels. 

In 2016, we saw the beginning of our plan for diversification take hold with the acquisition of Quality Circuit Assembly, Inc. (“QCA”), when Alpine 4 acquired 100% of QCA’s stock effective April 1, 2016.  Additional information relating to our acquisition of QCA can be found in our Current Report on Form 8-K, filed with the SEC on March 15, 2016.

In October 2016, Alpine 4 formed a new Limited Liability Company called ALTIA (Automotive Logic & Technology In Action) to create an independent subsidiary for Alpine 4’s 6th Sense Auto product and its BrakeActive product.

Effective, January 1, 2017, Alpine 4 acquired 100% of Venture West Energy Services (“VWES”) (formerly Horizon Well Testing, LLC). Additional information about the acquisition of VWES can be found below under “Recent Developments” and in our Current Reports on Form 8-K filed with the SEC on December 8, 2016, and January 13, 2017.  Due to many different circumstances but primarily from the effects of the theft event that occurred in April 2017 on December 31, 2018, we discontinued operations on this company and will begin the liquidation of the VWES assets.  In February 2019, VWES filed for Chapter 7 bankruptcy.

In April 2018, Alpine 4 acquired 100% of American Precision Fabricators (APF) Additional information relating to our acquisition of APF can be found in our Current Report on Form 8-K, filed with the SEC on April 10th 2018.

At the core of our business strategy is our focus on scalable corporate platform solutions.  We have built a strong portfolio of manufacturing, software, and energy driven businesses with a focus on long-term value creation.

5

As of the date of the filing of this Annual Report, our subsidiaries and product groups consisted of the following:

Subsidiaries & Product Groups

As of the date of the filing of this Report, we had the following subsidiaries and product groups:

ALTIA, LLC is an automotive technology company with several core product offerings.
   

6th Sense Auto is a connected car technology that provides a distinctive and powerful advantage to management, sales, finance and service departments at automotive dealerships in order to increase productivity, profitability and customer retention.   6thSenseAuto uses disruptive technology to improve inventory management, reduce costs, increase sales, and enhance service.
     

BrakeActive™ is a safety device that can improve a vehicle’s third brake light’s ability to greatly reduce or prevent a rear end collision by as much as 40%. According to a National Highway Traffic Safety Administration report issued in 2010, rear end collisions could be reduced by 90% if trailing vehicles had one additional second to react. The Company’s new programmable technology and device aims to provide this additional reaction time to trailing vehicles.
     
Quality Circuit Assembly (“QCA”) - Since 1988, QCA has been providing electronic contract manufacturing solutions delivered to its customers via strategic business partnerships. Our abilities encompass a wide variety of skills, beginning with prototype development and culminating in the ongoing manufacturing of a complete product or assembly. Turnkey solutions are tailored around each customer's specific requirements.  Conveniently located in San Jose, California, with close proximity to San Jose airport and all major carriers, QCA’s primary aim is to provide contract-manufacturing solutions to market leading companies within the industrial, scientific, instrumentation, military, medical and green industries.
     
American Precision Fabricators (“APF”) – Based in Fort Smith, Arkansas, APF is a sheet metal fabricator that provides American made fabricated metal parts, assemblies and sub-assemblies to Original Equipment Manufacturers (“OEM”). The Company supplies several industries with fabricated parts that it creates in-house.  It offers several production capabilities with its state-of-the-art machinery.
     
Morris Sheet Metal (“MSM”) – Based in Fort Wayne, Indiana, MSM is a commercial sheet metal contractor and fabricator. MSM designs, fabricates, and installs dust collectors, commercial ductwork, kitchen hoods, industrial ventilation systems, machine guards, architectural work, water furnaces, and much more.
     
JTD Spiral (“JTD”) -  Based in Fort Wayne, Indiana, JTD is a sister company to MSM and provides specialized spiral duct work to MSM clientele.

Recent Developments

New Acquisitions

On January 9, 2019, Alpine 4 announced that it had entered into a Securities Purchase Agreement (the "SPA") with Morris Sheet Metal Corp., an Indiana corporation ("MSM"), JTD Spiral, Inc. a wholly owned subsidiary of MSM, an Indiana corporation ("JTD Spiral"), Morris Enterprises LLC, an Indiana limited liability company ("Morris Enterprises") and Morris Transportation LLC, an Indiana limited liability company ("Morris Transportation"), and James Morris, Daniel Morris and Timothy Morris (each a "Seller," and collectively, the "Sellers").

The total consideration paid was $6,600,000 (the "Purchase Price"), which is the sum of the Cash Consideration paid at Closing, $3,150,000, and the Promissory Note Consideration, consisting of consist of a Secured Promissory Note to James Morris in the amount of $1,033,333.33 and a Secured Promissory Note to Timothy Morris in the amount of $1,033,333.33 and a Secured Promissory Note to  Daniel Morris in the amount of $1,033,333.33 (the "Primary Notes"), and a Secured Promissory Note to James Morris in the amount of $116,666.66 and a Secured Promissory Note to Timothy Morris in the amount of $116,666.66 and a Secured Promissory Note to  Daniel Morris in the amount of $116,666.66 (the "Supplemental Notes").  Additional information about the acquisitions and the transactions can be found in a Current Report filed by the Company on January 11, 2019.
6

Pursuant to the SPA, on January 1, 2019, Alpine 4 took effective control of MSM and JTD.

Based in Fort Wayne, Indiana, MSM is commercial sheet metal contractor and fabricator. MSM designs, fabricates, and installs dust collectors, commercial ductwork, kitchen hoods, industrial ventilation systems, machine guards, architectural work, water furnaces, and much more.
   
Based in Fort Wayne, Indiana, JTD is a sister company to MSM and provides specialized spiral duct work to MSM clientele.

Convertible Notes

On January 10, 2018, the Company entered into a variable convertible note for $150,000 with net proceeds of $135,000.  The note is due October 1, 2018 and bears interest at 12% per annum.  The note is immediately convertible into shares of Class A common stock at the lesser of $0.16 per share or 60% of the lowest trading price the previous 25 days prior to conversion.  The Company can prepay the note within the first 90 days following January 10, 2018 with a prepayment penalty equal to 145% of the total outstanding balance.  The Company also issued 499,999 shares to the lender with this note.  As of the date of this filing this note has been paid off.

On March 13, 2018, the Company entered into a variable convertible note for $128,000 with net proceeds of $125,000.  The note is due December 30, 2018 and bears interest at 12% per annum.  After 180 days, the note is convertible into shares of Class A common stock at a discount of 42% of the average of the 2 lowest trading price the previous 10 days prior to conversion.  The Company can prepay the note at a penalty ranging from 15% to 40%. As of the date of this filing this note has been paid off.

On April 3, 2018, the Company entered into a variable convertible note for $85,000 with net proceeds of $79,000.  The note is due January 2, 2019 and bears interest at 10% per annum.  The note is immediately convertible into shares of the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion.  In connection with this variable convertible note, the Company issued 386,363 shares of its Class A common stock.  As of the date of this filing this note has been paid off.

On April 5, 2018, the Company entered into convertible promissory notes for an aggregate principal amount of $450,000 as part of the consideration for the acquisition of APF.  The convertible notes are due in full in 36 months and bear interest at 4.25% per annum, and are convertible into shares of Class A common stock after 6 months from the issuance date at a rate of $1 per share.

On April 9, 2018, the Company entered into a variable convertible note for $124,199 with net proceeds of $115,000.  The note is due January 9, 2019 and bears interest at 12% per annum.  After 180 days, the note is convertible into shares of the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion.  In connection with this variable convertible note, the Company issued 76,670 shares of its Class A common stock, along with warrants to purchase 153,340 shares of Class A common stock at an exercise price of $1 per share which are immediately vested and have a 3 years contractual life.  As of the date of this filing this note has been paid off.

On April 9, 2018, the Company entered into a variable convertible note for $37,800 with net proceeds of $35,000.  The note is due January 9, 2019 and bears interest at 12% per annum.  After 180 days, the note is convertible into shares of the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion.
7

On June 4, 2018, the Company entered into a variable convertible note for $165,000 with net proceeds of $151,500.  The note is due January 21, 2019, as amended, and bears interest at 10% per annum.  The note is immediately convertible into shares of the Company's Class A common stock at a discount of 42% to the average of the two lowest trading closing prices of the stock for ten days prior to conversion.  The Company issued 850,000 shares of Class A common stock to the note holder which are returnable if no event of default has occurred and the note is paid in full within 180 days of the note date.  As of the date of this filing this note has been paid off.


On July 16, 2018, the Company entered into a variable convertible note for $220,000 with net proceeds of $214,000.  The note is due July 16, 2019 and bears interest at 10% per annum.  The note is immediately convertible into shares of the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion. As of the date of this filing this note has been paid off.

On July 18, 2018, the Company entered into a variable convertible note for $88,000 with net proceeds of $88,000.  The note is due April 30, 2019 and bears interest at 12% per annum.  The note is immediately convertible into shares of the Company's Class A common stock at a discount of 42% to the average of the two lowest trading closing prices of the stock for ten days prior to conversion. As of the date of this filing this note has been paid off.

On August 30, 2018, the Company entered into a variable convertible note for $337,500 with net proceeds of $303,750.  The note is due February 28, 2019 and bears interest at 10% per annum.  The note is immediately convertible into shares of the Company's Class A common stock at a discount of 42% to the average of the two lowest trading closing prices of the stock for ten days prior to conversion.

On September 27, 2018, the Company entered into a variable convertible note for $93,000 with net proceeds of $93,000.  The note is due July 15, 2019 and bears interest at 12% per annum.  The note is immediately convertible into shares of the Company's Class A common stock at a discount of 42% to the average of the two lowest trading closing prices of the stock for ten days prior to conversion.

On October 23, 2018, the Company entered into a variable convertible note for $220,000 with net proceeds of $198,000.  The note is due December 14, 2018 and bears interest at 10% per annum.  The note is immediately convertible into shares of the Company's Class A common stock at a discount of 42% to the average of the two lowest trading closing prices of the stock for ten days prior to conversion.  As of December 31, 2018 this note is past due.

On November 12, 2018, the Company entered into a variable convertible note for $670,000 with net proceeds of $636,000.  The note is due November 12, 2019 and bears interest at 10% per annum.  The note is immediately convertible into shares of the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion.

On December 7, 2018, the Company entered into a variable convertible note for $130,000 with net proceeds of $122,200.  The note is due September 7, 2019 and bears interest at 12% per annum.  The note is immediately convertible into shares of the Company's Class A common stock at a discount of 40% to the lowest trading closing prices of the stock for 20 days prior to conversion.

Issuance of Options

On July 31, 2017, the Company issued options to purchase 488,500 shares of the Company's Class A common stock to employees and consultants of the Company. The options were issued pursuant to the Company's 2016 Stock Option and Stock Award Plan (the “Plan”).  The options granted vest over four years, and the exercise price of the options granted is $0.13, which was the last closing bid price of the Company's common stock as traded on the OTCQB Market. In addition, during 2018, the Company issued an additional 1,064,000 options to purchase shares of the Company’s Class A common stock at exercise prices ranging from $0.05 to $0.10.

The options 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.
8

Employees

As of the date of this Report, we had 156 full-time and 3 part-time employees. We believe that our relationship with our employees is good. Other than as disclosed in this Report or previously filed with the SEC, we have no employment agreements with our employees.

ITEM 1A.   RISK FACTORS

Because of the following factors, as well as other factors affecting the Company's financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.

Risks Associated With Our Business and Operations

Alpine 4 is an "emerging growth company," and the reduced disclosure requirements applicable to "emerging growth companies" could make our common stock less attractive to investors.

Alpine 4 is an "emerging growth company," as defined in the JOBS Act. For as long as we are an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding advisory "say-on-pay" votes on executive compensation and shareholder advisory votes on golden parachute compensation. We will remain an "emerging growth company" until the earliest of (i) the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more; (ii) the last date of the fiscal year following the fifth anniversary of the date of the first sale of common stock under the Company's first filed registration statement; (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; and (iv) the date on which we are deemed to be a "large accelerated filer" under the Exchange Act. We will be deemed a large accelerated filer on the first day of the fiscal year after the market value of our common equity held by non-affiliates exceeds $700 million, measured on October 31.

We cannot predict if investors will find our common stock less attractive to the extent we rely on the exemptions available to emerging growth companies. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
 
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

A Company that elects to be treated as an emerging growth company shall continue to be deemed an emerging growth company until the earliest of (i) the last day of the fiscal year during which it had total annual gross revenues of $1,000,000,000 (as indexed for inflation), (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of common stock under the Company's first filed registration statement; (iii) the date on which it has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or (iv) the date on which is deemed to be a 'large accelerated filer' as defined by the SEC, which would generally occur upon it attaining a public float of at least $700 million.

However, we are choosing to "opt out" of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
9

Our independent auditors have expressed substantial doubt about our ability to continue as a going concern.

Alpine 4 has incurred net losses of $28,520,094 since inception through December 31, 2018.  This net loss was primarily driven in 2015 by stock issuance to employees and the ceasing of business operations for its subsidiary Venture West Energy Services, LLC.  Because we have yet to attain profitable operations, in their report on our financial statements for the period ended December 31, 2018, our independent auditors included an explanatory paragraph regarding their substantial doubt about our ability to continue as a going concern.  While management believes Alpine 4 will have net operating gains beginning in 2019, there can be no guarantee that we will be able to achieve these net operating gains.  Our ability to continue as a going concern is subject to our ability to generate a profit and/or obtain necessary funding from outside sources, including obtaining additional funding from the sale of our securities, increasing sales or obtaining loan from various financial institutions where possible.  Our net operating losses increase the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.  Our financial statements contain additional note disclosures describing the management's assessment of our ability to continue as a going concern.
 
Management of Alpine 4 cannot guarantee that Alpine 4 will continue to generate revenues which could result in a total loss of the value of your investment if it is unsuccessful in its business plans.

While Alpine 4 and its subsidiaries have long term Purchase Order arrangements with its large Contract Manufacturing customers and Master Service Agreements with its mechanical customers that can provide a level of dependable revenue, there can be no assurance that Alpine 4 will be able to continue to generate revenues or that revenues will be sufficient to maintain its business.  As a result, investors or shareholders could lose all of their investment if Alpine 4 is not successful in its proposed business plans.

Alpine 4's needs could exceed the amount of time or level of experience its officers and directors may have.  Alpine 4 will be dependent on key executives, and the loss of the services of the current officers and directors could severely impact Alpine 4's business operations.  
 
Alpine 4's business plan does not provide for the hiring of any additional employees other than outlined in its plan of operations until sales will support the expense.  Until that time, the responsibility of developing Alpine 4's business and fulfilling the reporting requirements of a public company will fall upon the officers and the directors.  In the event they are unable to fulfill any aspect of their duties to Alpine 4, it may experience a shortfall or complete lack of sales resulting in little or no profits and eventual closure of our business.

Additionally, the management of future growth will require, among other things, continued development of Alpine 4's financial and management controls and management information systems, stringent control of costs, increased marketing activities, and the ability to attract and retain qualified management, research, and marketing personnel.  The loss of key executives or the failure to hire qualified replacement personnel would compromise Alpine 4's ability to generate revenues or otherwise have a material adverse effect on Alpine 4.  There can be no assurance that Alpine 4 will be able to successfully attract and retain skilled and experienced personnel.

Significant time and management resources are required to ensure compliance with public company reporting and other obligations. Taking steps to comply with these requirements will increase our costs and require additional management resources, and does not ensure that we will be able to satisfy them.
 
We are a publicly reporting company.  As a public company, we are required to comply with applicable provisions of the Sarbanes-Oxley Act of 2002, as well as other federal securities laws, and rules and regulations promulgated by the SEC and the various exchanges and trading facilities where our common stock may trade, which result in significant legal, accounting, administrative and other costs and expenses. These rules and requirements impose certain corporate governance requirements relating to director independence, distributing annual and interim reports, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest, and codes of conduct, depending on where our shares trade. Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all applicable requirements.
10

As we review our internal controls and procedures, we may determine that they are ineffective or have material weaknesses, which could impact the market's acceptance of our filings and financial statements.
 
In connection with the preparation of this Annual Report, we conducted a review of our internal control over financial reporting for the purpose of providing the management report required by these rules. During the course of our review and testing, we have identified deficiencies and have been unable to remediate them before we were required to provide the required reports. Furthermore, because we have material weaknesses in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. Even if we are able to remediate the material weaknesses, we may not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information and cause the trading price of our stock to fall. In addition, as a public company we are required to file in a timely manner accurate quarterly and annual reports with the SEC under the Securities Exchange Act of 1934 (the "Exchange Act"), as amended.  Any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from the market or trading facility where our shares may trade, or other adverse consequences that would materially harm our business.

Because Alpine 4 has shown a net loss since inception, ownership of Alpine 4 shares is highly risky and could result in a complete loss of the value of your investment if Alpine 4 is unsuccessful in its business plans.

Based upon current plans, Alpine 4 expects to stop incurring operating losses in future periods as its subsidiaries move from their Optimization Phase to its Asset Producing Phase.   However new additional subsidiaries may incur significant expenses associated with the growth of those businesses.  Further, there is no guarantee that it will be successful in realizing future revenues or in achieving or sustaining positive cash flow at any time in the future.  Any such failure could result in the possible closure of its business or force Alpine 4 to seek additional capital through loans or additional sales of its equity securities to continue business operations, which would dilute the value of any shares you receive in connection with the Share Exchange.

Growth and development of operations will depend on the growth in the Alpine 4 acquisition model and from organic growth from its subsidiaries businesses.  If Alpine 4 cannot find desirable acquisition candidates, it may not be able to generate growth with future revenues.

Alpine 4 expects to acquire two additional companies in 2019, which management believes will result in significant growth in projected annualized revenue by the end of 2019.  However, there is no guarantee that it will be successful in realizing future revenue growth from its acquisition model.  As such, Alpine 4 is highly dependent on suitable candidates to acquire which the supply of those candidates cannot be guaranteed and is driven from the market for M&A.  If Alpine 4 is unable to locate or identify suitable acquisition candidates, or to enter into transactions with such candidates, or if Alpine 4 is unable to integrate the acquired businesses, Alpine 4 may not be able to grow its revenues to the extent anticipated, or at all.

Alpine 4 has limited management resources, and will be dependent on key executives.  The loss of the services of the current officers and directors could severely impact Alpine 4's business operations and future development, which could result in a loss of revenues and adversely impact the ability to ever sell any Exchange Shares received through participation in the Share Exchange.

Alpine 4 is relying on a small number of key individuals to implement its business and operations and, in particular, the professional expertise and services of Kent B. Wilson, our President, Chief Executive Officer, and Secretary,  and Charles Winters, our Chairman of the Board of Directors.  Mr. Wilson intends to serve full time in his capacities with Alpine 4 to work to develop and grow the Company. Nevertheless, Alpine 4 may not have sufficient managerial resources to successfully manage the increased business activity envisioned by its business strategy.  In addition, Alpine 4's future success depends in large part on the continued service of Mr. Wilson.  If he chooses not to serve as an officer or if he is unable to perform his duties, this could have an adverse effect on Company business operations, financial condition and operating results if we are unable to replace Mr. Wilson or Mr. Winters with other individuals qualified to develop and market our business.  The loss of their services could result in a loss of revenues, which could result in a reduction of the value of any ownership of Alpine 4.
11

Competition that Alpine 4 faces is varied and strong.

Alpine 4's subsidiaries’ products and industries as a whole are subject to competition.  There is no guarantee that we can sustain our market position or expand our business.  

We compete with a number of entities in providing products to our customers.  Such competitor entities include a variety of large nationwide corporations, including but not limited to public entities and companies that have established loyal customer bases over several decades.

Many of our current and potential competitors are well established and have significantly greater financial and operational resources, and name recognition than we have.  As a result, these competitors may have greater credibility with both existing and potential customers.  They also may be able to offer more competitive products and services and more aggressively promote and sell their products.  Our competitors may also be able to support more aggressive pricing than we will be able to, which could adversely affect sales, cause us to decrease our prices to remain competitive, or otherwise reduce the overall gross profit earned on our products.

Our success in business and operations will depend on general economic conditions.

The success of Alpine 4 and its subsidiaries depends, to a large extent, on certain economic factors that are beyond its control.  Factors such as general economic conditions, levels of unemployment, interest rates, tax rates at all levels of government, competition and other factors beyond Alpine 4's control may have an adverse effect on the ability of our subsidiaries to sell its products, to operate, and to collect sums due and owing to them.

Alpine 4 may not be able to successfully implement its business strategy, which could adversely affect its business, financial condition, results of operations and cash flows.  If Alpine 4 cannot successfully implement its business strategy, it could result in the loss of the value of your investment.

Successful implementation of our business strategy depends on our being able to acquire additional businesses and grow our existing subsidiaries, as well as on factors specific to the industries in which our subsidiaries operate, and the state of the financial industry and numerous other factors that may be beyond our control.  Adverse changes in the following factors could undermine our business strategy and have a material adverse effect on our business, our financial condition, and results of operations and cash flow:

The competitive environment in the industries in which our subsidiaries operate that may force us to reduce prices below the optimal pricing level or increase promotional spending;
   
Our ability to anticipate changes in consumer preferences and to meet customers' needs for our products in a timely cost effective manner; and
   
Our ability to establish, maintain and eventually grow market share in these competitive environments.

Our revenue growth rate depends primarily on our ability to satisfy relevant channels and end-customer demands, identify suppliers of our necessary ingredients and to coordinate those suppliers, all subject to many unpredictable factors.

We may not be able to identify and maintain the necessary relationships with suppliers of product and services as planned.  Delays or failures in deliveries could materially and adversely affect our growth strategy and expected results.  As we supply more customers, our rate of expansion relative to the size of such customer base will decline. In addition, one of our biggest challenges is securing an adequate supply of suitable product.  Competition for product is intense, and commodities costs subject to price volatility.

12

Our ability to execute our business plan also depends on other factors, including:
 
ability to keep satisfied vendor relationships
   
hiring and training qualified personnel in local markets;
   
managing marketing and development costs at affordable levels;
   
cost and availability of labor;
   
the availability of, and our ability to obtain, adequate supplies of ingredients that meet our quality standards; and
   
securing required governmental approvals in a timely manner when necessary.

Risks Related to Our Common Stock

Alpine 4 stockholders, and others who choose to purchase shares of Alpine 4 common stock if and when offered, may have difficulty in reselling their shares due to the limited public market or state Blue Sky laws.

Our common stock is currently quoted on the OTC market.  Current Alpine 4 stockholders and persons who desire to purchase them in any trading market should be aware that there might be additional significant state law restrictions upon the ability of investors to resell our shares. Accordingly, investors should consider any secondary market for our securities to be a limited one.

Sales of our common stock under Rule 144 could reduce the price of our stock.

Under Rule 144 affiliates of Alpine 4 may not sell more than one percent of the total issued and outstanding shares in any 90-day period and must resell the shares in an unsolicited brokerage transaction at the market price. If substantial amounts of our common stock become available for resale under Rule 144 once a market has developed for our common stock, the then-prevailing market prices for our common stock may be reduced.

We may, in the future, issue additional securities, which would reduce our stockholders' percent of ownership and may dilute our share value.

Our Certificate of Incorporation, as amended to date, authorizes us to issue 100,000,000 shares of Class A common stock, and 5,000,000 shares of Class B common stock. As of the date of this Annual Report, we had 28,507,853 shares of Class A common stock outstanding, and 5,000,000 shares of Class B common stock outstanding. Accordingly, we may issue up to an additional 71,492,144 shares of Class A common stock, and may not issue any additional shares of Class B common stock.  The future issuance of additional shares of Class A common stock may result in additional dilution in the percentage of our Class A common stock held by our then existing stockholders. We may value any Class A common stock issued in the future on an arbitrary basis including for services or acquisitions or other corporate actions that may have the effect of diluting the value of the shares held by our stockholders, and might have an adverse effect on any trading market for our Class A common stock.  Additionally, our board of directors may designate the rights terms and preferences of one or more series of preferred stock at its discretion including conversion and voting preferences without prior notice to our stockholders.  Any of these events could have a dilutive effect on the ownership of our shareholders, and the value of shares owned.

Raising additional capital or purchasing businesses through the issuance of common stock will cause dilution to our existing stockholders.
 
We may seek additional capital through a combination of private and public equity offerings, debt financings, collaborations, and strategic and licensing arrangements, as well as issuing stock to make additional business or asset acquisitions. To the extent that we raise additional capital through the sale of common stock or securities convertible or exchangeable into common stock or through the issuance of equity for purchases of businesses or assets, your ownership interest in Alpine 4 will be diluted.

13

Raising additional capital may restrict our operations or require us to relinquish rights.

We may seek additional capital through a combination of private and public equity offerings, debt financings, collaborations, and strategic and licensing arrangements.  To the extent that we raise additional capital through the sale of common stock or securities convertible or exchangeable into common stock, the terms of any such securities may include liquidation or other preferences that materially adversely affect your rights as a stockholder.  Debt financing, if available, would increase our fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.  If we raise additional funds through collaboration, strategic partnerships and licensing arrangements with third parties, we may have to relinquish valuable rights to our intellectual property, future revenue streams or grant licenses on terms that are not favorable to us.
 
Market volatility may affect our stock price and the value of your shares.
 
The market price for our common stock is likely to be volatile, in part because the volume of trades of our common stock. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including, among others:
 
announcements of new products, brands, commercial relationships, acquisitions or other events by us or our competitors; 
   
regulatory or legal developments in the United States and other countries; 
   
fluctuations in stock market prices and trading volumes of similar companies;
   
general market conditions and overall fluctuations in U.S. equity markets;
   
variations in our quarterly operating results;
   
changes in our financial guidance or securities analysts' estimates of our financial performance; 
   
changes in accounting principles;
   
our ability to raise additional capital and the terms on which we can raise it;
   
sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders; 
   
additions or departures of key personnel;
   
discussion of us or our stock price by the press and by online investor communities; and 
   
other risks and uncertainties described in these risk factors.

If securities or industry analysts do not publish or cease publishing research or reports or publish misleading, inaccurate or unfavorable research about us, our business or our market, our stock price and trading volume could decline.
 
The trading market for our common stock will be influenced by the research and reports that securities or industry analysts may publish about us, our business, our market or our competitors. We currently have limited coverage and may never obtain increased research coverage by securities and industry analysts. If no or few securities or industry analysts cover our company, the trading price and volume of our stock would likely be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, or provides more favorable relative recommendations about our competitors, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price or trading volume to decline.
14

Future sales of our common stock may cause our stock price to decline.
 
Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur could significantly reduce the market price of our common stock and impair our ability to raise adequate capital through the sale of additional equity securities.
 
Our compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls may be time consuming, difficult and costly.

Alpine 4's executive officers do not have experience being officers of a public company.   It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by Sarbanes-Oxley.  We may need to hire additional financial reporting, internal controls and other finance staff in order to develop and implement appropriate internal controls and reporting procedures.  If we are unable to comply with Sarbanes-Oxley's internal controls requirements, we may not be able to obtain the independent accountant certifications that Sarbanes-Oxley Act requires publicly-traded companies to obtain.

Alpine 4 may issue Preferred Stock with voting and conversion rights that could adversely affect the voting power of the holders of Common Stock.
 
Alpine 4's Board of Directors may issue Preferred Stock with voting and conversion rights that could adversely affect the voting power of the holders of Common Stock.  Any such provision may be deemed to have a potential anti-takeover effect, and the issuance of Preferred Stock in accordance with such provision may delay or prevent a change of control of Alpine 4.  The Board of Directors also may declare a dividend on any outstanding shares of Preferred Stock.  All outstanding shares of Preferred Stock are fully paid and non-assessable.

ITEM 1B.   UNRESOLVED STAFF COMMENTS.

Not applicable to Smaller Reporting Companies.

ITEM 2.  PROPERTIES.

Alpine 4 Technologies, Ltd maintains our corporate office in rented offices at 2525 E Arizona Biltmore Cir, Suite 237, Phoenix, AZ 85016. The monthly rent obligation is approximately $5,100 per month.

Quality Circuit Assembly, Inc. rents a location at 1709 Junction Court #380 San Jose, CA 95112.  The monthly rent obligation is approximately $27,500 per month.

Venture West Energy Services, LLC rent a property 6504 SW 29th, Bldg B Oklahoma City, OK 73179.  The monthly rent obligation is approximately $4,500 per month.

American Precision Fabricators, rents a property 4401 Savannah St. Fort Smith, AR 72903 for $15,833 per month.

ITEM 3.  LEGAL PROCEEDINGS.

Kevin Cannon et al. v. Alpine 4 Technologies Ltd., Jeff Hail, et al, Arizona Superior Court, Maricopa County, Cas No. CV2017-055699.  On October 4, 2017, Kevin Cannon and Michelle Hanby, individually and on behalf of It’s a Date LLC and Brake Plus NWA, Inc., filed a lawsuit in the Arizona Superior Court, Maricopa County, against the Company and several other defendants, including Jeff Hail, the Company’s Sr. Vice President. The claim against the Company alleged tortious interference of contract by the Company. The Company brought a motion to dismiss the Complaint for failure to state a claim on which relief could be granted. The Court permitted the plaintiffs to amend their complaint, which they did. The Company has filed another motion dismiss the Complaint for failure to state a claim on which relief could be granted. Following negotiations with the plaintiffs, the Company and the plaintiffs moved for dismissal of the Company. On January 28, 2019, the court dismissed all claims against the Company with prejudice.
15


ITEM 4.  MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

MARKET PRICES AND DIVIDEND DATA

Stock Prices

As of the date of this Report, our Class A common stock is listed on the OTCQB Market under the symbol ALPP.  Alpine 4 plans to work with a market maker and other professionals to drive trading volume and interest in the stock.

The following table shows the range of high and low sales price information for our Class A common stock as quoted on the OTC Markets for the calendar years 2017 and 2018 and for the first quarter of 2019.  Our Class A common stock was accepted for trading beginning on December 19, 2016.  The quotations below reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not represent actual transactions.

Calendar Year

 
 
2019
   
2018
   
2017
 
 
 
High
   
Low
   
High
   
Low
   
High
   
Low
 
 
                                   
First Quarter
 
$
0.05
   
$
0.0269
   
$
0.34
   
$
0.123
   
$
14.00
   
$
2.40
 
Second Quarter
                 
$
0.20
   
$
0.050
   
$
2.54
   
$
0.12
 
Third Quarter
                 
$
0.18
   
$
0.068
   
$
0.25
   
$
0.09
 
Fourth Quarter
                 
$
0.05
   
$
0.115
   
$
0.46
   
$
0.098
 

The high and low sales prices for our Class A common stock on March 29, 2019, were $0.027  and $0.0269, respectively.  

PLEASE NOTE: Trading in the Company’s Class A common stock is limited, and as such, relatively small sales may have a disproportionately large impact on the trading price. The prices shown in the table above reflect the price fluctuations resulting from relatively low volume of trades.

Shareholders

As of March 31, 2019, Alpine 4 had 389 shareholders of record.  This number does not include an indeterminate number of stockholders whose shares are held by brokers in street name. The holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Holders of our common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to our common stock.
 
Dividends

Alpine 4 has not declared any cash dividends on its common stock since inception and does not anticipate paying such dividends in the foreseeable future. Any decisions as to future payments of dividends will depend on Alpine 4's earnings and financial position and such other facts, as the Board of Directors deems relevant.

Director Independence

Alpine 4 is not required by any outside organization (such as a stock exchange or trading facility) to have independent directors.
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Securities Authorized for Issuance under Equity Compensation Plans

 Adoption of 2016 Stock Option and Stock Award Plan

On November 10, 2016, the Company's Board of Directors adopted the Company's 2016 Stock Option and Stock Award Plan (the “Plan”).  Pursuant to the Plan, the Company may issue stock options, including incentive stock options and non-qualifying stock options, and stock grants to employees and consultants of the Company, as set forth in the Plan, a copy of which was filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2016.

The Company has reserved 2,000,000 shares of the Company's Class A common stock for issuance under the Plan.

Equity Compensation Plan Information

Plan category
 
Number of
securities to
be issued upon exercise of outstanding
options,
warrants
and rights
   
Weighted-
average
exercise price
of outstanding options,
warrants
and rights
   
Number of
securities
remaining
available for
future issuance under equity compensation
plans (excluding securities
reflected in column (a))
 
 
 
(a)
   
(b)
   
(c)
 
Equity compensation plans approved by security holders
   
1,790,000
   
$
0.19
     
210,000
 
Equity compensation plans not approved by security holders
                       
Total
   
1,790,000
   
$
0.19
     
210,000
 

Recent Sales of Unregistered Securities

Issuances in 2018

Issuance of Convertible Notes

On January 5, 2018, the Company entered into a variable convertible note for $64,000.  The note is due July 5, 2018 and bears interest at 10% per annum.  The note is immediately convertible into the Company’s Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for the ten days prior to conversion.  As of the date of this filing this note has been paid off.

On April 3, 2018, the Company entered into a variable convertible note with an unrelated lender for $85,000.  The note is due January 2, 2019 and bears interest at 10% per annum.  The note is immediately convertible into shares of the Company’s Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion.  As of the date of this filing this note has been paid off.

On April 5, 2018, the Company entered into a variable convertible note with an unrelated lender for $128,000.  The note is due December 18, 2018 and bears interest at 12% per annum.  After 180 days, the note is convertible into shares of the Company’s Class A common stock at a discount of 40% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion.  As of the date of this filing this note has been paid off.

17

On April 9, 2018, the Company entered into a variable convertible note for $124,199.  The note is due January 9, 2019 and bears interest at 12% per annum.  After 180 days, the note is convertible to the Company’s Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for the ten days prior to conversion.  As of the date of this filing this note has been paid off.

On April 9, 2018, the Company entered into a variable convertible note for $37,800.  The note is due January 9, 2019 and bears interest at 12% per annum.  After 180 days, the note is convertible to the Company’s Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for the ten days prior to conversion.

The convertible notes issued between January and April 2018 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.

Convertible Notes

On October 4, 2017, the Company entered into a convertible note with an unrelated lender for $60,000 with net proceeds of $55,000.  The note is due July 4, 2018 and bears interest at 12% per annum.  After 180 days, the note is convertible to the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion.  The Company can prepay the convertible note up to 180 days from October 5, 2017.  The prepayment penalty is equal to 20% to 25% of the outstanding note amount depending on when prepaid. As of the date of this filing this note has been paid off.
18

On October 11, 2017, the Company entered into a convertible note with an unrelated lender for $58,500 with net proceeds of $55,500.  The note is due July 20, 2018 and bears interest at 12% per annum.  After 180 days, the note is convertible to the Company's Class A common stock at a discount of 38% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion.  The Company can prepay the convertible note up to 180 days from October 11, 2017.  The prepayment penalty is equal to 10% to 27% of the outstanding note amount depending on when prepaid. As of the date of this filing this note has been paid off.

On November 2, 2017, the Company entered into a variable convertible note with unrelated 3rd party for $115,000 with net proceeds of $107,000.  The note is due May 2, 2018 and bears interest at 10% per annum.  The note is immediately convertible to the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion.  The Company can prepay the convertible note up to 180 days from November 2, 2017 with a $750 prepayment penalty. As of the date of this filing this note has been paid off.

On November 1, 2017, in contemplation of entering into the November 2, 2017 note, the Company released 150,000 shares of the 500,000 returnable shares (see Note 8 – Other items Related to Equity).  The shares were consideration for the second note dated November 2, 2017, and as such will be accounted for as a discount associated with that note.

On November 28, 2017, the Company entered into a variable convertible note with unrelated third party for $105,000.  The note is due June 15, 2018 and bears interest at 10% per annum.  The note is immediately convertible to the Company's Class A common stock at a discount of 35% to the average of the three lowest trading closing prices of the stock for ten days prior to conversion.  The Company can prepay the convertible note up to 180 days from November 28, 2018 with a $750 prepayment penalty. As of the date of this filing this note has been paid off.

The convertible notes issued between October and December 2017 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.

Other Equity transaction

On November 1, 2017, the Company entered into an agreement with the investor relations firm RedChip Companies Inc. ("RedChip").  The agreement is for six months with a review after 90 days.  The Company will pay RedChip $2,500 per month for months 1-3 and $5,000 per month for months 4-6.  For the first 90 days of service the Company issued 275,000 shares of the Company's Class A common shares which are restricted pursuant to the provisions of Rule 144.  For the second 90 days of service the Company will issue 125,000 shares for the Company's Class A common shares which are restricted pursuant to the provisions of Rule 144.

The shares of common stock were issued and will be 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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Issuance of Equity Securities in Venture West/Horizon Transaction

In connection with the acquisition of Venture West Energy Services (“VWES”) (formerly Horizon Well Testing, L.L.C.), described in more detail above under “Recent Developments,” Alpine 4 purchased all of the outstanding stock of VWES (the “VWES Stock”) from Alan Martin (the “Seller”).  The purchase price paid by Alpine 4 for the VWES Stock consisted of cash, a note, a convertible note, and securities consideration.  The “Cash Consideration” paid was $2,200,000.  The “Note” consisted of a secured note in the amount of $300,000, secured by a subordinated security interest in the assets of VWES .  The Note bears interest at 1% and will be payable in full by April 30, 2017.  The “Convertible Note” consisted of a secured convertible note in the amount of $1,500,000, secured by a subordinated security interest in the assets of VWES .  The VWES Seller has the opportunity to convert the Convertible Note into shares of Alpine 4’s Class A common stock at a conversion price of $8.50 after a restricted period according to securities laws.    The Convertible Note bears interest at 5% and is payable in full with a balloon payment on the 18-month anniversary of the closing date of the transaction with no monthly payments.  The “Securities” consisted of two components, an aggregate of 379,403 shares of Alpine 4’s Class A common stock issued to the Seller, and a warrant to purchase an additional 75,000 shares of Class A common stock.

The Note, the Convertible Note, and the Securities was issued to the Seller pursuant to a share exchange agreement with the Seller, in which the Seller made certain representations and warranties, including that he was an accredited investor, that he was acquiring the securities for his own account and not for the account of another, that he was acquiring the securities for investment purposes and not with a view to distribute the securities acquired, and that he had sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of an investment in the Company. As such, the securities were issued to the Seller without registration under the 1933 Act in reliance on Section 4(a)(2) of the 1933 Act and the rules and regulations promulgated thereunder.   The VWES transaction did not involve a public offering.

Stock Options to Employees

On April 7, 2017, the Company issued 741,500 options to purchase shares of the Company’s Class A common stock to 34 employees and consultants of the Company. The options were issued pursuant to the Company’s 2016 Stock Option and Stock Award Plan (the “Plan”).  The options granted vest and the exercise price of the options granted was $0.90, which was the last closing bid price of the Company’s common stock as traded on the OTC QB Market..

On April 10, 2018, the Company issued 85,000 options to purchase shares of the Company’s Class A common stock to APF employees. The options were issued pursuant to the Plan.  The options granted vest and the exercise price of the options granted was $0.10, which was the last closing bid price of the Company’s common stock as traded on the OTC QB Market.  The options vest quarterly over four years.

On May 16, 2018, the Company issued 704,000 options to purchase shares of the Company’s Class A common stock to VWES employees. The options were issued pursuant to the Plan.  The options granted vest and the exercise price of the options granted was $0.05, which was the last closing bid price of the Company’s common stock as traded on the OTC QB Market.  The options vest quarterly over four years.

On December 31, 2018, the Company issued 275,000 options to purchase shares of the Company’s Class A common stock to two employees. The options were issued pursuant to the Plan.  The options granted vest and the exercise price of the options granted was $0.05, which was the last closing bid price of the Company’s common stock as traded on the OTC QB Market.  The options vest quarterly over four years.

The Company provided to each of the recipients of the Options copies of the Company’s public filings including the financial information and other disclosures about the Company. The options were issued to the recipients without registration under the 1933 Act in reliance on Section 4(a)(2) of the 1933 Act and rules and regulations promulgated thereunder. The issuance of the options did not involve a public offering of the Company’s securities.

Purchases of Equity Securities by the Company and Affiliated Purchasers

During the fourth quarter of 2018, there were no purchases of the Company’s equity securities by the Company or affiliated purchasers

ITEM 6.   SELECTED FINANCIAL DATA.

Not required for Smaller Reporting Companies.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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.
20

Overview and Highlights

Company Background

Alpine 4 Technologies Ltd. (the "Company") was incorporated under the laws of the State of Delaware on April 22, 2014.  Alpine 4 Technologies, Ltd (ALPP) is 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.  This unique perspective has culminated in the development of our Blockchain enabled Enterprise Business Operating System called SPECTRUMebos. 

As of the date of this Report, the Company was a holding company that owned five operating subsidiaries: ALTIA, LLC; Quality Circuit Assembly, Inc.; American Precision Fabricators, Inc.; Morris Sheet Metal, Corp; and JTD Spiral, Inc. (As discussed in more detail below, we previously had an additional subsidiary, Venture West Energy Services (formerly Horizon Well Testing, LLC). However, as of December 31, 2018, we discontinued operations on this company.)

Business Strategy

Alpine 4's strategy is to provide Fortune 500-level execution strategies in its subsidiary companies and market segments to businesses and companies that have the most to benefit from this access.

Alpine 4 feels this opportunity exists in smaller middle market operating companies with revenues between $5 to $150 million.  In this target rich environment, businesses generally sell at more reasonable multiples, presenting greater opportunities for operational and strategic improvements and have greater potential for growth.   Implementation of our strategy within our holdings is accomplished by the offering of strategic and tactical MBA-level training and development, delivered via the following modules:

Alpine 4 Mini MBA program; and
   
An Alpine 4 developed ERP (Enterprise Resource Planning system) and collaboration system called SPECTRUMebos.  SPECTRUMebos is an Enterprise Business Operating System (ebos).  This system will combine the key technology software components of Accounting and Financial Reporting, an Enterprise Resource Planning System (ERP), a Document Management System (DMS), a Business Intelligence (BI) platform and a Customer Resource Management (CRM) hub which will be tethered to management reporting and collaboration toolsets. Management believes that these tools will help drive real-time information in two directions: first, to the front lines by empowering customer-facing stakeholders; and second, back to management for planning, problem solving, and integration.   Management believes that SPECTRUMebos will be the technology "secret sauce" in managing our portfolio of companies and, in time, may be offered to external customers.
 

21

Business Seasonality and Product Introductions

Following the acquisition of the Quality Circuit Assembly, Inc., VWES and APF, the Company expects to experience higher net sales in its third and fourth quarters compared to other quarters in its fiscal year Each company has varying seasonality to their sales and will be reflected in the financial statements.

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 $28,520,094 as of December 31, 2018.  The Company requires capital for its contemplated operational and marketing activities.  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 contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise 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.  Our net operating losses increase the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.  Our financial statements contain additional note disclosures describing the management's assessment of our ability to continue as a going concern.
 
The management of Alpine 4 understands basis for including a going concern in this filing.  However, the management points out that over the past 4 years, Alpine 4 has consistently been able to operate under the current working capital environment and the going concern is nothing new or a recent event.    In order to mitigate the risk related with the going concern uncertainty, the Company has a three-fold plan to resolve these risks.  First, the acquisitions of QCA, VWES, and APF have allowed for an increased level of cash flow to the Company.  Second, the Company is considering other potential acquisition targets that, like QCA, should increase income and cash flow to the Company.  Third, the Company plans to issue additional shares of common stock for cash and services during the next 12 months and has engaged professional service firms to provide advisory services in connection with that capital raise.

Results of Operations

The following are the results of our operations for the year ended December 31, 2018 as compared to 2017.

   
Year Ended December 31,
2018
   
Year Ended December 31,
2017
   
$ Change
 
                   
Revenue
 
$
14,261,794
   
$
8,318,016
   
$
5,943,778
 
Cost of revenue
   
9,440,998
     
5,907,421
     
3,533,577
 
Gross Profit
   
4,820,796
     
2,410,595
     
2,410,201
 
                         
Operating expenses:
                       
General and administrative expenses
   
5,470,148
     
2,814,111
     
2,656,037
 
Total operating expenses
   
5,470,148
     
2,814,111
     
2,656,037
 
Loss from operations
   
(649,352
)
   
(403,516
)
   
(245,836
)
                         
Other expenses
                       
Interest expense
   
3,121,201
     
1,262,493
     
1,858,708
 
Change in value of derivative liabilities
   
(604,219
)
   
126,054
     
(730,273
)
Gain on extinguishment of debt
   
(6,305
)
   
0
     
(6,305
)
Other (income)
   
(119,737
)
   
(246,895
)
   
127,158
 
Total other expenses
   
2,390,940
     
1,141,652
     
1,249,288
 
                         
Loss before income tax
   
(3,040,292
)
   
(1,545,168
)
   
(1,495,124
)
                         
Income tax expense
   
(43,399
)
   
(258,392
)
   
214,993
 
                         
Loss from continuing operations
   
(2,996,893
)
   
(1,286,776
)
   
(1,710,117
)
                         
Discontinue operations
   
(4,911,124
)
   
(1,710,644
)
   
(3,200,480
)
                         
Net loss
 
$
(7,908,017
)
 
$
(2,997,420
)
 
$
(4,910,597
)

Revenue

Our revenues for the year ended December 31, 2018, increased by $5,943,778 as compared to the year ended December 31, 2017.  In 2018, the increase in revenue is related to $2,744,022 for QCA, $3,104,791 for APF which did not exist in 2017, and $94,965 relating to the 6th Sense Auto and Brake Active services of ALTIA.  The increase in revenue was driven by the continued growth of QCA through the acquisition of new customers and expanded business with existing customers, as well as the acquisition of APF.  We expect our revenue to continue to grow during the next year.

Cost of revenue

Our cost of revenue for the year ended December 31, 2018, increased by $3,533,577 as compared to the year ended December 31, 2017.  In 2018, the increase in our cost of revenue related to $1,602,387 for QCA, $2,026,716 for APF which did not exist in 2017, and $(95,526) for ALTIA services and other.  The increase in cost of revenue among all the different segments was the result of the increase in revenues.  We expect our cost of revenue to increase over the next year as our revenue increases.

Operating expenses

Our operating expenses for the year ended December 31, 2018, increased by $2,656,037 as compared to the year ended December 31, 2017.  The increase consisted primarily of an increase to general and administrative expenses of was the result of increased operating activity resulting from the acquisition of APF during the second quarter of 2018 which did not exist in 2017.

Other expenses

Other expenses for the year ended December 31, 2018, increased by $1,249,288 as compared to 2017. This increase was primarily due to an increase in interest expense due to the issuance of new convertible debentures offset by the change in the fair value of our derivative liability.

Discontinued operations

In December 2018, we decided to shut down the operations of our VWES subsidiary.  In February 2019, VWES filed for Chapter 7 bankruptcy.
 
VWES has been presented as discontinued operations in the accompanying consolidated financial statements.
22

 The operating results for VWES have been presented in the accompanying consolidated statement of operations for the years ended December 31, 2018 and 2017 as discontinued operations and are summarized below:
 
   
Years Ended
 
   
December 31,
   
December 31,
 
   
2018
   
2017
 
Revenue
 
$
3,040,458
   
$
1,773,474
 
Cost of revenue
   
2,974,313
     
2,288,815
 
Gross Profit
   
66,145
     
(515,341
)
Operating expenses
   
5,045,078
     
890,856
 
Loss from operations
   
(4,978,933
)
   
(1,406,197
)
Other income (expenses)
   
67,809
     
(304,447
)
Net loss
 
$
(4,911,124
)
 
$
(1,710,644
)

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.

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.

Contractual Obligations

Our significant contractual obligations as of December 31, 2018, were as follows:

   
Payments due by Period
 
   
Less than
One Year
   
One to
Three Years
   
Three to
Five Years
   
More Than
Five Years
   
Total
 
Capital lease obligations
   
817,181
     
1,685,667
     
1,740,779
     
8,763,471
     
13,007,098
 
Operating lease obligations
   
274,118
     
573,154
     
-
     
-
     
847,272
 
Notes payable, related parties
   
132,000
     
-
     
-
     
-
     
132,000
 
Notes payable, non-related parties
   
3,645,603
     
4,450,566
     
66,875
     
-
     
8,163,044
 
Convertible notes payable
   
3,587,587
     
450,000
     
-
     
-
     
4,037,587
 
Total
   
8,456,489
     
7,159,387
     
1,807,654
     
8,763,471
     
26,187,001
 

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.

23

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which require that we make certain assumptions and estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses during each reporting period.  On an ongoing basis, management evaluates its estimates, including those related to collection of receivables, impairment of goodwill, contingencies, calculation of derivative liabilities and income taxes. Management bases its estimates and judgments on historical experiences and on various other factors believed to be reasonable under the circumstances. Actual results under circumstances and conditions different than those assumed could result in material differences from the estimated amounts in the financial statements. 
 
For a summary of our critical accounting policies, refer to Note 2 of our consolidated financial statements included under Item 8 – Financial Statements in this Form 10-K.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for Smaller Reporting Companies.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements and footnotes thereto are set forth beginning on page F-1 of this Report.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.
 
ITEM 9A.  CONTROLS AND PROCEDURES

1. Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, as of December 31, 2018.  Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this Report, our disclosure controls and procedures were ineffective.

2. Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fourth quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3. Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that:
24


pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
   
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles;
   
provide reasonable assurance that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and
   
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in "Internal Control—Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, our management determined that our internal controls over financial reporting were not effective as of December 31, 2018.

Areas of material weakness include:

inadequate segregation of duties
   
inadequate control activities and monitoring processes over financial reporting

4. Inherent Limitations on Effectiveness of Controls

Generally, disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.  Nevertheless, an internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system reflects the fact that there are resource constraints, and the benefits of controls are considered relative to their costs. As noted above, we have determined that our disclosure controls and procedures and our internal controls over financial reporting were not effective as of December 31, 2018.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

ITEM 9B.   OTHER INFORMATION

None.
25

PART III
 
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

As of the date of this Report, the officers and directors of Alpine 4 were the following:

Name
Age
Officer/Position
Board Member/Position
Kent B. Wilson
45
President, Chief Executive Officer
Director
Charles Winters
40
N/A
Chairman of the Board
Scott Edwards
62
N/A
Director
Ian Kantrowitz
36
N/A
Director
Jeffrey Hail
55
Sr. Vice President
 

Biographical Information for Kent B. Wilson

Mr. Wilson serves as the Chief Executive Officer and Secretary for the Company. Previously, he has raised approximately two million dollars via seed capital and private placement funds to start Crystal Technology Holdings, Ltd./NextSure, LLC.  This company successfully designed, built, and brought two products to market, including an internet-based insurance rating engine that allowed prospective buyers to rate and buy their auto insurance online via a virtual insurance agent.  Since 2002 Mr. Wilson has been actively involved with all facets of corporate financial and operational planning and has held the title of CFO and CEO for several different companies.  Mr. Wilson has also consulted for various finance departments of publicly traded companies such as JDA Software and Switch & Data, Inc. to help them identify and develop best SOX and GAAP practices and procedures. In 2011, Mr. Wilson took over as CFO of United Petroleum Company and helped guide them from a small startup with less than $1 million in revenue to a company with $20 million in revenue and a growth path for 2013 and 2014.Mr. Wilson holds a BA degree in Management and holds an MBA from Northcentral University.​

On August 21, 2014, Mr. Wilson formed a corporation, WBK 1 Inc., a Delaware corporation.  On September 17, 2014, WBK 1 Inc. filed a Form 10 with the U.S. Securities and Exchange Commission.  WBK 1 Inc. is a "shell company" as defined in the rules of the SEC.  Mr. Wilson was the Chief Executive Officer, Secretary, Treasurer and Director of WBK 1 Inc. from its inception through December 28, 2014, when he sold all of his ownership in WBK 1 to an unrelated third party.  WBK 1 disclosed the change in ownership in a Current Report filed with the Commission on December 29, 2014.  There is no relationship between Alpine 4 and WBK 1 Inc.

Biographical Information for Charles Winters

Mr. Winters is an automotive executive with over 10 years of automotive dealership experience.  He is also a principal in several automotive dealerships and repair shops throughout the southwest.  Mr. Winters holds a Bachelor's Degree in Economics from Auburn University.

Biographical Information for Scott Edwards

Mr. Edwards is automotive sales and marketing executive with over 19 years of experience in the automotive industry.  He currently represents a large national automotive franchise distributorship and has extensive knowledge of the inner workings of the retail and wholesale automotive market.

Biographical Information for Ian Kantrowitz

As Director of Investor Relations, Mr. Kantrowitz is accountable for creating and presenting a consistently applied investment message to our shareholders and the investment community on behalf of Alpine 4. Furthermore, he is responsible for monitoring and presenting management with the opinions of the investment community regarding the company's performance.

Prior to joining the Alpine 4 team, Mr. Kantrowitz was a project manager for two major homebuilders in Phoenix, AZ, Continental Homes and Engle Homes.  Mr. Kantrowitz has also been actively involved in the automotive industry where his in-depth knowledge of the auto industry lends a valuable perspective to our in-house product, 6th Sense Auto. Additionally, he was a top performing banker for Wells Fargo Bank, ranked number 5 in the country.

Our bylaws authorize no fewer than one director. As of the date of this Report, we had four directors.

Biographical Information for Jeff Hail

Jeff Hail is the Sr. Chief Operating Officer (COO) of Alpine 4 Technologies, Ltd. Raised and educated in Scottsdale, AZ; Mr. Hail earned his Bachelors of Science degree in Operations and Production Management from the W.P. Carey School of Business at Arizona State University  Mr. Hail’s professional experience has been both in the government and private sector.  As a Buyer/Contract Officer with the Arizona Department of Transportation writing, awarding and administering highway services contracts.

In the private sector, Mr. Hail experienced success by starting a number different companies and building them to be the leaders in their niche sectors from both electronics manufacturing to e-commerce.  As a result, he brings a broad-based experience level with the operational aspects of running a business in today’s realm.
26

Term of office. Our directors are appointed for a one-year term to hold office until the next annual meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our Board and hold office until removed by the Board.

Family relationships. There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.

Director or officer involvement in certain legal proceedings. To the best of our knowledge, except as described below, during the past five years, none of the following occurred with respect to a present or former director or executive officer of the Company: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of any competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

As of the date of this Report, we did not have a standing audit, compensation, or nominating committee of the Board of Directors.  The Company has determined that the Board of Directors does not have an "Audit Committee Financial Expert" as that term is defined in Item 407(d)(5) of SEC Regulation S-K.

Section 16(a) beneficial ownership reporting compliance. Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities. Officers, directors and greater than ten percent beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To the best of our knowledge based solely on a review of Forms 3, 4, and 5 (and any amendments thereof) received by us during or with respect to the year ended December 31, 2018, the following persons failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act during fiscal year ended December 2018:

Name and Principal Position
Number of Late Reports
Transactions not
Reported in Timely
Manner
Known
Failures
to File a
Required Form
Kent Wilson, CEO, Director
1
1
None
Charles Winters, Director
0
1
1
Scott Edwards, Director
1
1
None
Ian Kantrowitz, Director
2
2
None
 
27

ITEM 11. EXECUTIVE COMPENSATION.
 
Summary Compensation Table
 

Outstanding Equity Awards

David Schmitt, the Company’s CFO through December 31, 2017, was granted 400,000 options on April 7, 2017 with a vesting period of 4 years and an exercise price of $0.90.  The options had a fair value of $311,563 on the date of grant as calculated under ASC 718.  Of the options included in this grant, 350,000 forfeited as of December 31, 2017.  Mr. Schmitt was also granted 100,000 options on July 31, 2017 with a vesting period of 4 years and an exercise price of $0.13.  The options had a fair value of $12,850 on the date of grant as calculated under ASC 718.  Of the options included in this grant, 93,750 forfeited as of December 31, 2017.

Director Compensation

The following table sets forth the amounts paid to the Company's directors for their service as directors of the Company.  Please note: the compensation of Mr. Wilson, who is also an executive officer of the Company, is set forth above.

Name  
Fees earned
or paid
in cash
   
Stock awards
   
Option awards
   
Non-equity
incentive
plan
compensation
   
Nonqualified deferred
compensation
 earnings
   
All other compensation
   
Total
 

 
($)
   
($)
    ($)     ($)     ($)    
($)
   
($)
 
(a)
 
(b)
   
(c)
   
(d)
   
(e)
   
(f)
   
(g)
   
(h)
 
Ian Kantrowitz
 
$
0
     
26,000
   
$
0
   
$
0
   
$
0
   
$
0
   
$
26,000
 
Kent Wilson
 
$
0
     
44,200
   
$
0
   
$
0
   
$
0
   
$
0
   
$
44,200
 
Charles Winters
 
$
0
     
26,000
   
$
0
   
$
0
   
$
0
   
$
0
   
$
26,000
 
Scott Edwards
 
$
0
     
7,800
   
$
0
   
$
0
   
$
0
   
$
0
   
$
7,800
 

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth certain information regarding beneficial ownership of Alpine 4 Class A and Class B common stock as of March 31, 2019, (i) by each person (or group of affiliated persons) who owns beneficially more than five percent of the outstanding shares of common stock, (ii) by each director and executive officer of Alpine 4, and (iii) by all of the directors and executive officers of Alpine 4 as a group.  The percentages are based on the following figures:

28,507,853, shares of Alpine 4 Class A common stock outstanding as of March 31, 2019
 
 
5,000,000 shares of Alpine 4 Class B common stock outstanding as of March 31, 2019.

Except as otherwise noted, the persons named in the table have sole voting and dispositive power with respect to all shares beneficially owned, subject to community property laws where applicable.
28


Name and Address of beneficial owner (1)
 
Amount of
beneficial
ownership of
Class A
Common
Stock
   
Amount of
beneficial
ownership of
Class B Common Stock
   
Percentage
of
Class A
Common
Stock (2)
   
Percentage
of Class B
Common
Stock
   
Voting
Power (3)
 
 
                             
Kent B. Wilson, Chief Executive Officer,  Director(4)
   
2,401,689
     
1,850,000
     
9.40
%
   
37.00
%
   
27.67
%
Jeff Hail, Chief Operating Officer
   
541,000
     
350,000
     
2.12
%
   
7.00
%
   
5.35
%
Scott Edwards, Director (5)
   
252,000
     
350,000
     
0.99
%
   
7.00
%
   
4.97
%
Charles Winters, Director (6)
   
709,800
     
700,000
     
2.78
%
   
14.00
%
   
10.21
%
Ian Kantrowitz, Director (7)
   
847,371
     
700,000
     
3.32
%
   
14.00
%
   
10.39
%
Richard Evans
515 W. Coliseum Blvd
Ft. Wayne, IN 46808
   
3,270,000
     
0
     
12.80
%
   
0
%
   
4.33
%
All Officers and Directors As a Group (5 persons)
   
4,751,860
     
3,950,000
     
18.61
%
   
79.00
%
   
58.58
%

(1)
Except as otherwise indicated, the address of the stockholder is: Alpine 4 Technologies Ltd., 2525 E Arizona Biltmore Cir, Suite 237, Phoenix AZ 85016.
(2)
The percentages listed in the table are based on 28,507,853 shares of Alpine 4 Class A common stock outstanding as of March 31, 2019.
(3)
The Voting Power column includes the effect of shares of Class B common stock held by the named individuals, as indicated in the footnotes below. Each share of Class B common stock has 10 votes.  The total voting power for each person is also explained in the footnotes below.
(4)
Mr. Wilson owned as of the date of this Report 2,401,689 shares of Class A common stock, and 1,850,000 shares of Class B common stock, which represents an aggregate of 20,901,689 votes, or approximately 27.67% of the voting power.
(5)
Mr. Edwards owned as of the date of this Report 252,000 shares of Class A Common Stock.  Additionally, Mr. Edwards owned 350,000 shares of Alpine 4 Class B Common Stock which together with the Class A Common Stock will represent an aggregate of 3,752,000 votes, or approximately 4.97 % of the voting power.
(6)
Mr. Winters owned as of the date of this Report 709,800 shares of Class A Common Stock.  Additionally, Mr. Winters owns 700,000 shares of Alpine 4 Class B Common Stock which together with the Class A Common Stock will represent an aggregate of 7,709,800 votes, or approximately 10.21% of the voting power.
(7)
Mr. Kantrowitz owned as of the date of this Report 847,371 shares of Class A Common Stock.  Additionally, Mr. Kantrowitz owned 700,000 shares of Alpine 4 Class B Common Stock which together with the Class A Common Stock will represent an aggregate of 7,847,371 votes, or approximately 10.39% of the voting power.
(8)
Mr. Jeff Hail owned as of the date of this Report 541,000 shares of Class A Common Stock.  Additionally, Mr. Hail owned 350,000 shares of Alpine 4 Class B Common Stock which together with the Class A Common Stock will represent an aggregate of 4,041,000 votes, or approximately 5.35% of the voting power.

29

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Related Party Transactions

The Company has outstanding notes payable due to related parties totaling $132,000 at December 31, 2018.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Malone Bailey

Set below are aggregate fees billed by Malone Bailey for professional services rendered for the year ended December 31, 2018.

Audit Fees

The fees for the audit and review services billed and to be billed by Malone Bailey for the period from January 1, 2018, to December 31, 2018 were $228,766.

Audit Related Fees

The fees for the audit related services billed and to be billed by Malone Bailey for the period from January 1, 2018, to December 31, 2018 were $0.

Tax Fees

The fees for the tax related services billed and to be billed by Malone Bailey for the period from January 1, 2018, to December 31, 2018 were $0.

Set forth below are the aggregate fees billed by Malone Bailey for professional services rendered for the year ended December 31, 2017.

Audit Fees

The fees for the audit and review services billed and to be billed by Malone Bailey for the period from January 1, 2017, to December 31, 2017 were $116,000.

Audit Related Fees

The fees for the audit related services billed and to be billed by Malone Bailey for the period from January 1, 2017, to December 31, 2017 were $0.

Tax Fees

The fees for the tax related services billed and to be billed by Malone Bailey for the period from January 1, 2017, to December 31, 2017 were $0.

PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

15(a)(1). Financial Statements.

The following consolidated financial statements, and related notes and Report of Independent Registered Public Accounting Firm are filed as part of this Annual Report:
30

ALPINE 4 TECHNOLOGIES, LTD.
Consolidated Financial Statements
 
Contents

 
Page
Financial Statements:
 
   
Report of Independent Registered Public Accounting Firm
32
   
Consolidated Balance Sheets as of December 31, 2018 and 2017
33
 
 
Consolidated Statements of Operations for the Years Ended December 31, 2018 and 2017
34
 
 
Consolidated Statements of Stockholders' Deficit for the Years Ended December 31, 2018 and 2017
35
 
 
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018 and 2017
36
 
 
Notes to Consolidated Financial Statements
37

31


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 
To the Board of Directors and Stockholders of
Alpine 4 Technologies, Ltd.
Phoenix, Arizona
 
Opinion on the Financial Statements
 
We have audited the accompanying consolidated balance sheets of Alpine 4 Technologies, Ltd. and its subsidiaries (collectively, the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Matter

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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 Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

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.

/s/ MaloneBailey, LLP
www.malonebailey.com
We have served as the Company's auditor since 2015.
Houston, Texas
April 22, 2019
32


ALPINE 4 TECHNOLOGIES, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

   
December 31,
   
December 31,
 
   
2018
   
2017
 
             
ASSETS
           
             
CURRENT ASSETS:
           
Cash
 
$
207,205
   
$
128,512
 
Accounts receivable
   
2,610,354
     
1,560,480
 
Inventory
   
2,175,795
     
1,212,546
 
Capitalized contract costs
   
64,234
     
-
 
Prepaid expenses and other current assets
   
222,200
     
154,385
 
Assets of discontinued operations
   
121,296
     
574,174
 
Total current assets
   
5,401,084
     
3,630,097
 
                 
Property and equipment, net
   
7,990,556
     
5,023,758
 
Intangible asset, net
   
677,210
     
752,622
 
Goodwill
   
3,193,861
     
1,963,761
 
Other non-current assets
   
290,238
     
258,238
 
Assets of discontinued operations
   
387,727
     
4,342,474
 
                 
 TOTAL ASSETS
 
$
17,940,676
   
$
15,970,950
 
                 
LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' DEFICIT
               
                 
CURRENT LIABILITIES:
               
Accounts payable
 
$
3,102,970
   
$
1,367,989
 
Accrued expenses
   
1,254,853
     
739,645
 
Deferred revenue
   
25,287
     
64,918
 
Derivative liabilities
   
1,892,321
     
271,588
 
Deposits
   
12,509
     
12,509
 
Notes payable, current portion
   
3,645,603
     
1,814,689
 
Notes payable, related parties, current portion
   
132,000
     
43,500
 
Convertible notes payable, current portion, net of discount of $942,852 and $79,630
   
2,644,735
     
2,302,620
 
Financing lease obligation, current portion
   
105,458
     
24,590
 
Net liabilities of discontinued operations
   
2,752,447
     
3,344,974
 
 Total current liabilities
   
15,568,183
     
9,987,022
 
                 
Notes payable, net of current portion
   
4,517,441
     
-
 
Convertible notes payable, net of current portion
   
450,000
     
1,660,106
 
Financing lease obligations, net of current portion
   
8,295,176
     
6,560,112
 
Deferred revenue
   
-
     
43
 
Deferred tax liability
   
608,304
     
181,703
 
                 
TOTAL LIABILITIES
   
29,439,104
     
18,388,986
 
                 
REDEEMABLE COMMON STOCK
               
Class A Common stock, $0.0001 par value, 0 and 379,403 shares issued and outstanding at December 31, 2018 and 2017
   
-
     
1,439,725
 
                 
STOCKHOLDERS' DEFICIT:
               
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding at December 31, 2018 and 2017
   
-
     
-
 
Class A Common stock, $0.0001 par value, 100,000,000 shares authorized, 26,567,410 and 23,222,087 shares issued and outstanding at December 31, 2018 and 2017
   
2,575
     
2,322
 
Class B Common stock, $0.0001 par value, 5,000,000 shares authorized, 5,000,000 and 1,600,000 shares issued and outstanding at December 31, 2018 and 2017
   
500
     
160
 
Additional paid-in capital
   
17,018,591
     
16,573,632
 
Accumulated deficit
   
(28,520,094
)
   
(20,433,875
)
Total stockholders' deficit
   
(11,498,428
)
   
(3,857,761
)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
 
$
17,940,676
   
$
15,970,950
 

The accompanying notes are an integral part of these consolidated financial statements.
33


ALPINE 4 TECHNOLOGIES, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

   
Years Ended
December 31,
 
   
2018
   
2017
 
             
Revenue
 
$
14,261,794
   
$
8,318,016
 
Cost of revenue
   
9,440,998
     
5,907,421
 
Gross Profit
   
4,820,796
     
2,410,595
 
                 
Operating expenses:
               
General and administrative expenses
   
5,470,148
     
2,814,111
 
                 
Total operating expenses
   
5,470,148
     
2,814,111
 
Loss from operations
   
(649,352
)
   
(403,516
)
                 
Other expenses
               
Interest expense
   
(3,121,201
)
   
(1,262,493
)
Change in value of derivative liability
   
604,219
     
(126,054
)
Gain on extinguishment of debt
   
6,305
     
-
 
Other income
   
119,737
     
246,895
 
Total other expenses
   
(2,390,940
)
   
(1,141,652
)
                 
Loss before income tax
   
(3,040,292
)
   
(1,545,168
)
                 
Income tax (benefit)
   
(43,399
)
   
(258,392
)
                 
Loss from continuing operations
   
(2,996,893
)
   
(1,286,776
)
                 
Discontinued operations:
               
Loss from discontinued operations
   
(4,911,124
)
   
(1,710,644
)
Total discontinued operations
   
(4,911,124
)
   
(1,710,644
)
                 
Net loss
 
$
(7,908,017
)
 
$
(2,997,420
)
                 
Weighted average shares outstanding :
               
Basic
   
28,447,969
     
23,858,031
 
Diluted
   
28,447,969
     
23,858,031
 
                 
Basic and Diluted Loss per shares
               
Continuing operations
 
$
(0.11
)
 
$
(0.06
)
Discontinued operations
   
(0.17
)
 
$
(0.07
)
  
 
$
(0.28
)
   
(0.13
)

The accompanying notes are an integral part of these consolidated financial statements.
34


ALPINE 4 TECHNOLOGIES, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

                           
Additional
         
Total
 
   
Class A Common Stock
   
Class B Common Stock
   
Paid-in
   
Accumulated
   
Stockholders'
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Deficit
   
Deficit
 
Balance, December 31, 2016
   
21,474,481
   
$
2,148
     
1,600,000
   
$
160
   
$
16,228,106
   
$
(17,436,455
)
 
$
(1,206,041
)
                                                         
Issuance of shares of common stock for cash
   
132,209
     
13
                     
39,987
             
40,000
 
Issuance of shares of common stock to consultants for services
   
578,640
     
57
                     
62,027
             
62,084
 
Issuance of shares of common stock for convertible note payable and accrued interest
   
886,757
     
89
                     
99,484
             
99,573
 
Issuance shares for discount on convertible note payable
   
150,000
     
15
                     
16,485
             
16,500
 
Reclassification of derivative liability
                                   
(252,633
)
           
(252,633
)
Derivative liability resolution
                                   
222,099
             
222,099
 
Issuance of warrants for acquisition of VWES
                                   
40,941
             
40,941
 
Share-based compensation expense
                                   
87,136
             
87,136
 
Beneficial conversation feature associated with convertible notes
                                   
30,000
             
30,000
 
Net loss
                                           
(2,997,420
)
   
(2,997,420
)
                                                         
Balance, December 31, 2017
   
23,222,087
     
2,322
     
1,600,000
     
160
     
16,573,632
     
(20,433,875
)
   
(3,857,761
)
                                                         
Adoption of ASC 606
                                           
(178,202
)
   
(178,202
)
Issuance of shares for discount/inducement on convertible note payable
   
1,849,999
      104
                     
65,910
             
66,014
 
Issuance of shares of common stock for modification of debt
   
100,000
     
10
                     
14,990
             
15,000
 
Issuance of shares of common stock for convertible note payable and accrued interest
   
1,015,921
      101
                      54,086
              54,187
 
Reclassification of shares from mezzanine
   
379,403
     
38
                     
(38
)
           
-
 
Change in fair value of warrant modification
                                   
4,310
             
4,310
 
Shares issued for employee compensation
                   
3,400,000
     
340
     
176,460
             
176,800
 
Derivative liability resolution
                                   
58,018
             
58,018
 
Share-based compensation expense
                                   
71,223
             
71,223
 
Net loss
                                           
(7,908,017
)
   
(7,908,017
)
                                                         
Balance, December 31, 2018
   
26,567,410
   
$
2,575
     
5,000,000
   
$
500
   
$
17,018,591
   
$
(28,520,094
)
 
$
(11,498,428
)

The accompanying notes are an integral part of these consolidated financial statements.
35


ALPINE 4 TECHNOLOGIES, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

   
Years Ended
December 31,
 
   
2018
   
2017
 
             
OPERATING ACTIVITIES:
           
Net loss
 
$
(7,908,017
)
 
$
(2,997,420
)
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation
   
871,847
     
671,423
 
Amortization
   
75,412
     
92,080
 
Gain on extinguishment of debt
   
(136,300
)
       
Loss on disposal of fixed assets
   
536,772
     
18,841
 
Change in value of derivative liabilities
   
(604,219
)
   
126,054
 
Employee stock compensation
   
71,223
     
87,136
 
Stock issued for services
   
176,800
     
62,084
 
Amortization of debt issuance
   
213,354
     
50,500
 
Amortization of debt discounts
   
1,428,954
     
89,292
 
Impairment of assets
   
1,764,382
     
-
 
Change in current assets and liabilities:
               
Accounts receivable
   
398,371
     
(506,436
)
Inventory
   
(348,194
)
   
(282,432
)
Capitalized contracts costs
   
37,300
         
Prepaid expenses and other assets
   
159,927
     
(120,379
)
Accounts payable
   
1,441,304
     
546,825
 
Accrued expenses
   
929,323
     
723,733
 
Income tax payable
           
(20,123
)
Deferred tax
   
(43,399
)
   
(105,450
)
Deferred revenue
   
(319,410
)
   
52,425
 
Net cash used in operating activities
   
(1,254,570
)
   
(1,511,847
)
                 
INVESTING ACTIVITIES:
               
Capital expenditures
   
(271,516
)
   
(192,805
)
Proceeds from insurance claim on automobiles and trucks
   
-
     
237,732
 
Proceeds from the sale of fixed assets
   
318,879
     
-
 
Acquisition, net of cash acquired
   
(1,976,750
)
   
(1,937,616
)
Net cash used in investing activities
   
(1,929,387
)
   
(1,892,689
)
                 
                 
FINANCING ACTIVITIES:
               
Proceeds from issuances of notes payable, related party
   
145,000
     
105,500
 
Proceeds from issuances of notes payable, non-related party
   
924,750
     
1,952,390
 
Proceeds from issuances of convertible notes payable
   
2,355,950
     
785,500
 
Proceeds from sale of common stock
   
-
     
40,000
 
Proceeds from sale leaseback transaction
   
1,900,000
     
-
 
Repayments of notes payable, related party
   
(56,500
)
   
(223,500
)
Repayments of notes payable, non-related party
   
(741,079
)
   
(247,084
)
Repayments of convertible notes payable
   
(1,417,133
)
   
(219,721
)
Proceeds from line of credit, net
   
327,325
     
709,201
 
Cash paid on financing lease obligations
   
(175,663
)
   
(1,691
)
                 
Net cash provided by financing activities
   
3,262,650
     
2,900,595
 
                 
NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH
   
78,693
     
(503,941
)
                 
CASH AND RESTRICTED CASH, BEGINNING BALANCE
   
335,823
     
839,764
 
                 
CASH AND RESTRICTED CASH, ENDING BALANCE
 
$
414,516
   
$
335,823
 
                 
CASH PAID FOR:
               
Interest
 
$
1,162,149
   
$
1,219,080
 
Income taxes
 
$
-
   
$
2,167
 
                 
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
         
Common stock issued for convertible note payable and accrued interest
 
$
54,187
   
$
99,573
 
Common stock issued for convertible note discount
 
$
11,917
   
$
16,500
 
Issuance of convertible note for acquisition
 
$
450,000
   
$
1,500,000
 
Issuance of note payable for acquisition
 
$
1,950,000
   
$
300,000
 
Issuance of warrants for acquisition
 
$
-
   
$
40,941
 
Issuance of redeemable common stock for acquisition
 
$
-
   
$
1,439,725
 
Debt discount from convertible note payable
 
$
-
   
$
30,000
 
Debt discount due to derivative liabilities
 
$
2,282,970
   
$
115,000
 
Reclassification of warrants embedded conversion option as derivative liability
 
$
-
   
$
252,633
 
Notes payable and redeemable common stock restructuring
 
$
3,197,538
   
$
-
 
Capital leases
 
$
247,000
   
$
-
 
Proceeds from sale of assets offset directly against debt
 
$
1,141,588
   
$
-
 
Release of derivative liability
 
$
58,018
   
$
-
 

The accompanying notes are an integral part of these consolidated financial statements.
 
36


ALPINE 4 TECHNOLOGIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2018 and 2017


Note 1 – Organization and Basis of Presentation

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.  The Company is a technology holding company owning four companies (ALTIA, LLC; Quality Circuit Assembly, Inc. ("QCA"); Venture West Energy Services (“VWES”) (formerly Horizon Well Testing, LLC); and American Precision Fabricators, Inc., an Arkansas corporation (“APF”).   On April 5, 2018, the Company acquired 100% of the outstanding shares of APF (see Note 9).

Basis of presentation

The accompanying 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 U.S. GAAP.

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 December 31, 2018 and 2017.  Significant intercompany balances and transactions have been eliminated.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.  These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances.  Actual results could differ from those estimates.

Reclassification

Certain prior year amounts have been reclassified to conform to the current period presentation.  These reclassifications had no impact on net earnings and financial position.

Advertising

Advertising costs are expensed when incurred.  All advertising takes place at the time of expense.  We have no long-term contracts for advertising.  Advertising expense for all periods presented were not significant.

Cash

Cash and cash equivalents consist of cash and short-term investments with original maturities of less than 90 days.   As of December 31, 2018 and 2017, the Company had no cash equivalents.