‎ UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________ 

FORM 10-Q

_____________________________________________________ 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended     March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  ______to  _____

Commission File Number: 001-31588  

PINEAPPLE ENERGY INC.

(Exact name of registrant as specified in its charter)  

MINNESOTA	41-0957999
(State or other jurisdiction of incorporation or organization)	(Federal Employer Identification No.)
10900 Red Circle Drive, Minnetonka, MN	55343
(Address of principal executive offices)	(Zip Code)

(952) 996-1674 

Registrant’s telephone number, including area code

Securities Registered Pursuant to Section 12(b) of the Act 

Title of Each Class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.05 per share	PEGY	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 such files). YES ☒ NO ☐

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐ Accelerated Filer ☐ Non-accelerated Filer ☒

Smaller Reporting Company ☒ Emerging growth company ☐    

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. YES ☐ NO ☒

APPLICABLE ONLY TO CORPORATE ISSUERS: 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Outstanding at May 15, 2022 7,435,586

PINEAPPLE ENERGY INC.

INDEX

			Page No.
Part I.	Financial Information
	Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets		2
	Condensed Consolidated Statements of Operations and Comprehensive Loss		4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity		5
	Condensed Consolidated Statements of Cash Flows		6
	Notes to Condensed Consolidated Financial Statements		7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30
	Item 4.	Controls and Procedures	30
Part II.	Other Information		32
SIGNATURES CERTIFICATIONS			34

‎

1

PINEAPPLE ENERGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
	March 31		December 31
	2022		2021
CURRENT ASSETS:
Cash and cash equivalents	$	5,750,143	$	18,966
Restricted cash		3,969,096		—
Investments		786,787		—
Trade accounts receivable, less allowance for
doubtful accounts of $59,000 and $0, respectively		2,804,070		—
Inventories, net		1,625,666		—
Prepaid income taxes		3,374		—
Other current assets		960,688		—
Current assets held for sale		6,566,855		—
TOTAL CURRENT ASSETS		22,466,679		18,966
PROPERTY, PLANT AND EQUIPMENT, net		298,895		—
OTHER ASSETS:
Investments		2,302,395		—
Goodwill		15,776,014		—
Operating lease right of use asset		127,902		—
Intangible assets, net		18,778,947		2,780,270
Other assets, net		41,139		—
TOTAL OTHER ASSETS		37,026,397		2,780,270
TOTAL ASSETS	$	59,791,971	$	2,799,236
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	2,922,795	$	2,233,371
Accrued compensation and benefits		797,473		307,828
Operating lease liability		93,721		—
Other accrued liabilities		8,904		—
Working capital note payable		—		350,000
Dividends payable		506,212		—
Deferred revenue		114,277		—
Contingent value rights		6,566,855		—
TOTAL CURRENT LIABILITIES		11,010,237		2,891,199
LONG-TERM LIABILITIES:
Loan payable and related interest		974,460		6,194,931
Related party payables		—		2,350,000
Operating lease liability		39,122		—
Deferred revenue		68,729		—
Contingent consideration		4,684,000		—
Contingent value rights		11,710,375		—
TOTAL LONG-TERM LIABILITIES		17,476,686		8,544,931
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY
Convertible preferred stock, par value $1.00 per share; 3,000,000 shares authorized; 32,000 and 0 shares issued and outstanding, respectively		32,000		—
Common stock, par value $0.05 per share; 37,500,000 shares authorized;
7,435,586 and 3,074,998 shares issued and outstanding, respectively		371,779		153,750
Additional paid-in capital		41,538,864		(53,750)
Accumulated deficit		(10,620,528)		(8,736,894)
Accumulated other comprehensive loss		(17,067)		—

2

TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		31,305,048		(8,636,894)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	59,791,971	$	2,799,236
The accompanying notes are an integral part of the condensed consolidated financial statements.

3

PINEAPPLE ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
	Three Months Ended March 31
	2022		2021
Sales	$	318,800	$	—
Cost of sales		223,668		—
Gross profit		95,132		—
Operating expenses:
Selling, general and administrative expenses		297,272		231,227
Amortization expense		357,463		357,324
Transaction costs		968,505		168,445
Total operating expenses		1,623,240		756,996
Operating loss		(1,528,108)		(756,996)
Other expenses:
Investment and other income (expense)		(5,144)		—
Interest and other expense		(350,382)		(311,413)
Other expense, net		(355,526)		(311,413)
Operating loss before income taxes		(1,883,634)		(1,068,409)
Income tax expense		—		—
Net loss		(1,883,634)		(1,068,409)
Other comprehensive loss, net of tax:
Unrealized loss on available-for-sale securities		(17,067)		—
Total other comprehensive loss		(17,067)		—
Comprehensive loss	$	(1,900,701)	$	(1,068,409)
Basic net loss per share:	$	(0.58)	$	(0.35)
Diluted net loss per share:	$	(0.58)	$	(0.35)
Weighted Average Basic Shares Outstanding		3,231,461		3,074,998
Weighted Average Dilutive Shares Outstanding		3,231,461		3,074,998
The accompanying notes are an integral part of the condensed consolidated financial statements.

‎

4

PINEAPPLE ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
For the Three Months Ended March 31, 2022
											Accumulated
	Series A						Additional				Other
	Preferred Stock			Common Stock			Paid-in		Accumulated		Comprehensive
	Shares	Amount		Shares	Amount		Capital		Deficit		Loss		Total
BALANCE AT DECEMBER 31, 2021	—	$	—	3,074,998	$	153,750	$	(53,750)	$	(8,736,894)	$	—	$	(8,636,894)
Net loss	—		—	—		—		—		(1,883,634)		—		(1,883,634)
Issuance of common stock for
professional services	—		—	12,499		625		(625)		—		—		—
Issuance of common stock for
conversion of related party payables	—		—	293,750		14,688		2,335,313		—		—		2,350,000
Issuance of common stock for
conversion of working capital note payable	—		—	62,500		3,125		496,875						500,000
Effect of reverse capitalization	—		—	2,429,341		121,467		1,473,312		—		—		1,594,779
Issuance of common stock for
HEC asset acquisition	—		—	1,562,498		78,125		12,703,109		—		—		12,781,234
Issuance of preferred stock and warrants
to PIPE investors, net of issuance costs	32,000		32,000	—		—		29,268,630		—		—		29,300,630
Contingent consideration related to
merger transaction	—		—	—		—		(4,684,000)		—		—		(4,684,000)
Other comprehensive loss	—		—	—		—		—		—		(17,067)		(17,067)
BALANCE AT MARCH 31, 2022	32,000	$	32,000	7,435,586	$	371,779	$	41,538,864	$	(10,620,528)	$	(17,067)	$	31,305,048

For the Three Months Ended March 31, 2021
								Accumulated
				Additional				Other
	Common Stock			Paid-in		Accumulated		Comprehensive
	Shares	Amount		Capital		Deficit		Loss		Total
BALANCE AT DECEMBER 31, 2020	3,074,998	$	153,750	$	(153,750)	$	(2,501,344)	$	—	$	(2,501,344)
Net loss	—		—		—		(1,068,409)		—		(1,068,409)
BALANCE AT MARCH 31, 2021	3,074,998	$	153,750	$	(153,750)	$	(3,569,753)	$	—	$	(3,569,753)

The accompanying notes are an integral part of the condensed consolidated financial statements.

‎

5

PINEAPPLE ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Three Months Ended March 31
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,883,634)	$	(1,068,409)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization		358,582		357,324
Interest and accretion expense		336,405		313,369
Changes in assets and liabilities:
Trade accounts receivable		(90,753)		—
Inventories		85,164		—
Other assets, net		292,141		—
Accounts payable		(2,532,508)		116,423
Accrued compensation and benefits		(503,595)		62,196
Other accrued liabilities