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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
o    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-40913
alpp10q_1.jpg
Alpine 4 Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware46-5482689
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
2525 E Arizona Biltmore Circle, Suite 237
Phoenix, AZ
85016
(Address of Principal Executive Offices)(Zip Code)
Registrant's telephone number, including area code: 480-702-2431
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
Large accelerated fileroAccelerated filero
Non-accelerated filerxSmaller reporting companyx
Emerging growth companyx
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(1) of the Exchange Act. x
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of June 4, 2024, the issuer had 24,650,957 shares of its Class A common stock issued and outstanding, 906,012 shares of its Class B common stock issued and outstanding and 1,498,539 shares of its Class C common stock issued and outstanding.


TABLE OF CONTENTS
2

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements and information in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 (the “Quarterly Report”), may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, which address activities, events, or developments that we expect or anticipate will or may occur in the future, including such things as future capital expenditures, commencement of business operations, business strategy, and other similar matters are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “hope,” “intend,” “project,” “positioned,” or “strategy” or other comparable terminology. These forward-looking statements are based largely on our current expectations and assumptions and are subject to a number of risks and uncertainties, many of which are beyond our control. These statements are subject to many risks, uncertainties, and other important factors that could cause actual future results to differ materially from those expressed in the forward-looking statements including, but not limited to, our ability to obtain products from the respective manufacturers; actions governments, businesses, and individuals take in response to the pandemic, the impact of the COVID-19 pandemic and action taken in response to the pandemic on global and regional economies and economic activity; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; our inability to sustain profitable sales growth; and circumstances or developments that may make us unable to implement or realize the anticipated benefits, or that may increase the costs, of our current and planned business initiatives. For a more thorough discussion of these risks, you should read this entire Report carefully, as well as the risks discussed under “Risk Factors” in our Annual Report for the year ended December 31, 2022.

Although management believes that the assumptions underlying the forward-looking statements included in this report are reasonable, such statements do not guarantee our future performance, and actual results could differ from those contemplated by these forward-looking statements. The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. In the light of these risks and uncertainties, all of the forward-looking statements made herein are qualified by these cautionary statements, and there can be no assurance that the results and events contemplated by the forward-looking statements contained in this report will in fact transpire. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We expressly disclaim any obligation or intention to update or revise any forward-looking statements.
3

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ALPINE 4 HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2023December 31, 2022
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $2,925,015 $2,673,541 
Accounts receivable, net 16,068,693 17,139,944 
Inventory22,234,478 25,258,369 
Contract assets1,647,435 1,402,788 
Prepaid expenses and other current assets1,969,978 2,428,223 
Total current assets 44,845,599 48,902,865 
Property and equipment, net20,155,368 19,503,485 
Intangible assets, net15,478,610 36,282,609 
Right of use (ROU) assets, net15,289,327 16,407,566 
Goodwill 7,782,514 22,680,084 
Other non-current assets 948,788 1,855,605 
TOTAL ASSETS $104,500,206 $145,632,214 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $18,249,084 $8,608,554 
Accrued expenses 7,318,063 6,749,890 
Contract liabilities 5,420,178 5,284,285 
Lines of credit, current portion11,077,614 7,426,814 
Notes payable, current portion 5,983,275 3,201,136 
Notes payable, related party638,250  
Convertible note payable995,528  
Financing lease obligation, current portion 800,610 725,302 
Operating lease obligation, current portion 1,555,872 1,318,885 
Total current liabilities 52,038,474 33,314,866 
Notes payable, non-current portion3,104,267 4,266,350 
Lines of credit, non-current portion442,962 7,215,520 
Financing lease obligations, non-current portion14,020,830 14,592,813 
Operating lease obligations, non-current portion14,049,037 15,262,494 
Deferred tax liability257,805 988,150 
TOTAL LIABILITIES 83,913,375 75,640,193 
Commitments and Contingencies (Note 10)
STOCKHOLDERS' EQUITY(1):
Preferred stock, $0.0001 par value, 5,000,000 shares authorized
— — 
Series B preferred stock; $1.00 stated value; 100 shares authorized, 3 and 5 shares issued and outstanding at September 30, 2023, and December 31, 2022
3 5 
Class A Common stock, $0.0001 par value, 200,000,000 shares authorized, 24,331,406 and 22,303,333 shares issued and outstanding at September 30, 2023, and December 31, 2022
2,432 2,230 
Class B Common stock, $0.0001 par value, 10,000,000 shares authorized, 906,012 and 1,068,512 shares issued and outstanding at September 30, 2023, and December 31, 2022
91 107 
Class C Common stock, $0.0001 par value, 15,000,000 shares authorized, 1,501,840 and 1,529,888 shares issued and outstanding at September 30, 2023, and December 31, 2022
151 153 
Additional paid-in capital 143,595,686 141,723,921 
Accumulated deficit (122,773,253)(71,734,395)
       Total stockholders' equity 20,825,110 69,992,021 
Non-controlling interest(238,279) 
Total equity 20,586,831 69,992,021 
TOTAL LIABILITIES AND EQUITY$104,500,206 $145,632,214 

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

(1) Current and prior period results have been adjusted to reflect the one-for-eight stock split effected in May 2023. See Note 7, Stockholders' Equity for details.
4

ALPINE 4 HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2023202220232022
Revenues, net $25,600,804 $27,486,415 $77,984,543 $78,349,695 
Cost of revenues22,237,697 21,894,759 61,617,890 62,277,188 
Gross profit3,363,107 5,591,656 16,366,653 16,072,507 
Operating expenses:
General and administrative expenses8,974,652 9,584,035 29,111,129 26,648,323 
Research and development1,412,219 26,602 3,138,655 707,281 
Gain on sale of property (115,700) (5,938,150)
Goodwill impairment losses14,897,570  14,897,570  
Intangible asset impairment losses18,407,843  18,407,843  
Total operating expenses43,692,284 9,494,937 65,555,197 21,417,454 
Loss from operations(40,329,177)(3,903,281)(49,188,544)(5,344,947)
Other income (expenses)
Interest expense (1,196,297)(1,051,239)(3,303,912)(2,636,955)
Gain on debt extinguishment490,312  490,312  
Other income (expense)(36,510)(6,126)22,596 356,805 
Total other income (expenses)(742,495)(1,057,365)(2,791,004)(2,280,150)
Loss before income tax(41,071,672)(4,960,646)(51,979,548)(7,625,097)
Income tax benefit(115,544)(196,276)(702,411)(400,973)
Net loss$(40,956,128)$(4,764,370)$(51,277,137)$(7,224,124)
Net loss attributable to non-controlling interest88,520 $ $238,279 $ 
Net loss attributable to common shareholders$(40,867,608)$(4,764,370)$(51,038,858)$(7,224,124)
Weighted average shares outstanding(1):
Basic27,409,203 24,721,070 25,666,740 23,472,306 
Diluted27,409,203 24,721,070 25,666,740 23,472,306 
Basic loss per share$(1.49)$(0.19)$(1.99)$(0.31)
Diluted loss per share$(1.49)$(0.19)$(1.99)$(0.31)

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

5

(1) Current and prior period results have been adjusted to reflect the one-for-eight stock split effected in May 2023. See Note 7, Stockholders' Equity for details.

6

ALPINE 4 HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS CHANGES IN STOCKHOLDERS' EQUITY (1)
(Unaudited)
Series B Preferred StockClass A Common
Stock
Class B Common
Stock
Class C Common
Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Total Stockholders’
Equity
Noncontrolling InterestTotal Equity
SharesAmountSharesAmountSharesAmountSharesAmount
Balance, December 31, 2022
5 $5 22,303,333 $2,230 1,068,512 $107 1,529,888 $153 $141,723,921 $(71,734,395)$69,992,021 $ $69,992,021 
Conversion of Class C Common Stock to Class A Common Stock— — 1,428 — — — (1,428)— — — — — — 
Series B Preferred Share removal(1)(1)— — — — — — 1 — — —  
Share-based compensation expense— — — — — — — — 182,589 — 182,589 — 182,589 
Net loss— — — — — — — — — (5,769,143)(5,769,143)— (5,769,143)
Balance, March 31, 20234 4 22,304,761 2,230 1,068,512 107 1,528,460 153 141,906,511 (77,503,538)64,405,467  64,405,467 
Conversion of Class B Common Stock to Class A Common Stock— — 162,500 16 (162,500)(16)— — — — — — — 
Conversion of Series B Preferred Stock to Class A Common Stock(1)(1)1 — — — — — 1 — — — — 
Issuance of shares of common stock and warrants for convertible note payable and accrued interest— — 1,477,400 148 — — — — 1,000,661 — 1,000,809 — 1,000,809 
Adjustment for additional shares issued in connection with the reverse stock split— — 29,995 3 — — 73 — — — 3 — 3 
Share-based compensation expense— — — — — — — — 165,289 — 165,289 — 165,289 
Net loss— — — — — — — — — (4,551,866)(4,551,866)— (4,551,866)
Balance, June 30, 20233 3 23,974,657 2,397 906,012 91 1,528,533 153 143,072,462 (82,055,404)61,019,702 61,019,702 
Issuance of shares of common stock for legal settlement— — 250,000 25 — — — — 497,475 — 497,500 — 497,500 
Issuance of shares of common stock for compensation— — 80,000 8 — — — — 91,192 — 91,200 — 91,200 
Conversion of Class C Common Stock to Class A Common Stock— — 26,749 2 — — (26,749)(2)— — — — — 
Adjustment for additional shares issued in connection with the reverse stock split— — — — — — 56 — — — — — — 
Share-based compensation expense— — — — — — — — (65,443)— (65,443)— (65,443)
Non controlling interest (NCI)— — — — — — — — — — — (88,520)(88,520)
Prior period NCI— — — — — — — — — 149,759 149,759 (149,759) 
Net loss— — — — — — — — — (40,867,608)(40,867,608)— (40,867,608)
Balance, September 30, 20233 $3 24,331,406 $2,432 906,012 $91 1,501,840 $151 $143,595,686 $(122,773,253)$20,825,110 $(238,279)$20,586,831 
Balance, December 31, 20215 $5 20,224,938 $2,022 1,068,512 $107 1,562,635 $156 $130,348,267 $(58,859,082)71,491,475 $ 71,491,476 
Issuance of shares of common stock for compensation— — 4,924 — — — — — 99,248 — 99,248 — 99,248 
Conversion of Series D preferred stock to Class A— — 7,989 1 — — — — 365,463 — 365,464 — 365,464 
Conversion of Series C preferred stock to Class A— — 1,031 — — — — — 34,622 — 34,622 — 34,622 
Share-based compensation expense— — — — — — — — 93,197 — 93,197 — 93,197 
Net loss— — — — — — — — — (3,999,560)(3,999,560)— (3,999,560)
Balance, March 31, 20225 5 20,238,882 2,023 1,068,512 107 1,562,635 156 130,940,797 (62,858,642)68,084,446 68,084,447 
Issuance of shares of common stock for compensation— — 21,482 2 — — — — 132,307 — 132,309 — 132,309 
Shares issued from ATM— — 9,515 1 — — — — 55,136 — 55,137 — 55,137 
Share-based compensation expense— — — — — — — — 172,183 — 172,183 — 172,183 
Net loss— — — — — — — — — 1,539,806 1,539,806 — 1,539,806 
Balance, June 30, 20225 5 20,269,879 2,026 1,068,512 107 1,562,635 156 131,300,423 (61,318,836)69,983,881 69,983,882 
Exchange of shares of common stock for compensation— — 4,688 — — — (4,688)— — — — —  
Issuance of shares of common stock for cash, net of offering costs— — 1,811,595 181 — — — — 9,173,552 — 9,173,733 — 9,173,733 
Shares issued from ATM— — 188,735 19 — — — — 1,042,167 — 1,042,186 — 1,042,186 
Share-based compensation expense— — — — — — — — 23,459 — 23,459 — 23,459 
Net loss— — — — — — — — — (4,764,370)(4,764,370)— (4,764,370)
Balance, September 30, 20225 $5 22,274,897 $2,226 1,068,512 $107 1,557,947 $156 $141,539,601 $(66,083,206)$75,458,889 $75,458,890 

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

(1) Current and prior period results have been adjusted to reflect the one-for-eight stock split effected in May 2023. See Note 7, Stockholders' Equity for details.
7

ALPINE 4 HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
20232022
OPERATING ACTIVITIES:
Net loss$(51,277,137)$(7,224,124)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation2,216,444 2,313,984 
Amortization2,386,173 2,276,256 
Gain on sale of property (5,938,150)
Stock compensation expense373,786 520,416 
Income tax benefit(730,345)(471,178)
Amortization of debt discounts620,051  
Gain on extinguishment of debt(490,312) 
Loss on asset disposal124,874  
Non-cash lease expense1,118,239 519,818 
Write off of inventory492,469 71,552 
Bad debt expense208,927 115,835 
Impairment of goodwill and intangible assets33,305,413  
Changes in current assets and liabilities:
Accounts receivable862,324 (4,698,142)
Inventory2,598,065 (634,484)
Contract assets(244,647)(529,602)
Prepaid expenses and other assets1,365,062 (2,022,333)
Accounts payable9,540,530 383,358 
Accrued expenses450,742 1,013,225 
Contract liabilities135,893 (2,989,957)
Operating lease liability(976,470)(419,446)
Net cash provided by (used in) operating activities2,080,081 (17,712,972)
INVESTING ACTIVITIES:
Capital expenditures(2,920,716)(756,870)
Proceeds from sale of building 12,454,943 
Proceeds from sale of asset 140,710 
Cash paid in international technology agreement (250,000)
Net cash (used in) provided by investing activities(2,920,716)11,588,783 
FINANCING ACTIVITIES:
Proceeds from the sale of common stock, net of offering costs 10,272,462 
Net proceeds (repayments) from issuances of notes payable, non-related party2,648,410 (2,164,610)
Proceeds from issuances of note payable, related party638,250  
Net proceeds (repayments) from lines of credit(3,295,256)4,875,062 
Net proceeds from issuance of convertible notes, non-related party1,964,000  
Debt issuance costs(366,620) 
Repayment of building mortgage (4,642,043)
Cash paid on financing lease obligations(496,675)(480,272)
Net cash provided by financing activities1,092,109 7,860,599 
NET INCREASE IN CASH251,474 1,736,410 
CASH, BEGINNING BALANCE2,673,541 3,715,666 
CASH, ENDING BALANCE$2,925,015 $5,452,076 
CASH PAID FOR:
Interest$3,853,435 $2,617,292 
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:
ROU asset and operating lease obligation recognized$ $9,043,595 
Equipment purchased on note payable$129,145 $243,843 
Conversion of Series D preferred stock for common stock$ $365,470 
Conversion of Series C preferred stock for common stock$ $34,622 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8

ALPINE 4 HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Organization and Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Alpine 4 Holdings, Inc. and its wholly owned subsidiaries (referred to herein collectively as the “Company,” “we,” “us” and “our”) and are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions for the periods presented have been eliminated in consolidation. Certain reclassifications have been made that have no impact on net earnings and financial position. The unaudited financial statements presented herein include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for the fair statement of the financial condition, results of operations and cash flows for the period. However, these results are not necessarily indicative of results that may be achieved for any other interim period or for the full fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules of the Securities and Exchange Commission (“SEC”). The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on May 5, 2023.

The Company was incorporated under the laws of the State of Delaware in April 2014. We are a publicly traded conglomerate that acquires businesses that fit into our disruptive DSF business model of Drivers, Stabilizers, and Facilitators.

Going Concern
The Company’s financial statements are prepared in accordance with U.S. GAAP applicable to a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business within one year after the date the condensed consolidated financial statements are issued. In accordance with Financial Accounting Standards Board (“FASB”), Accounting Standards Update (“ASU”) No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40), our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.

As shown in the accompanying condensed consolidated financial statements, the Company has incurred significant recurring losses but has positive cash flows from operations for the current year. Although the Company has experienced net losses of $51.3 million and $7.2 million for the nine months ended September 30, 2023 and 2022, respectively, net cash flows provided by operating activities improved to $2.1 million for the nine months ended September 30, 2023, from $17.7 million used in operating activities for the nine months ended September 30, 2022.

As of September 30, 2023, the Company had negative working capital of $7.2 million, which was a decrease of $22.8 million compared to December 31, 2022. The Company has bank financing totaling $35.0 million ($35.0 million in lines of credit including $0.4 million in capital expenditures lines of credit) of which $3.1 million was available and unused as of September 30, 2023. There are four lines of credit that are set to mature during the next twelve months. These four lines of credit total $34.0 million, of which $11.1 million was used as of September 30, 2023, and are shown as a current liability on the condensed consolidated balance sheet. These factors raise substantial doubt about the Company's ability to continue as a going concern.

The Company plans to continue to generate additional revenue, improve cash flows from operations, and improve gross profit performance across all of its subsidiaries. The Company also may raise funds through debt financing, securing additional lines of credit, and the sale of shares in public or private offerings.

As noted above, the Company has negative working capital and has continued to experience operating losses, which causes doubt as to the ability of the Company to continue. The Company's ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company's plan of operations, and its ultimate transition to profitable operations are necessary for the Company to continue. The uncertainty that exists with these factors raises substantial doubt about the Company's ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

9

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

Entity level risks
Our operations and performance may depend on global, regional, economic and geopolitical conditions. Russia’s invasion and military attacks on Ukraine have triggered significant sanctions from North American and European leaders. As of the date of this report, those events were continuing to escalate and create increasingly volatile global economic conditions. Resulting changes in North American trade policy could trigger retaliatory actions by Russia, its allies and other affected countries, including China, resulting in a “trade war.” A trade war could result in increased costs for raw materials that we use in our manufacturing and could otherwise limit our ability to sell our products abroad. These increased costs would have a negative effect on our financial condition and profitability. Furthermore, the military conflict between Russia and Ukraine is increasing supply interruptions and further hindering our ability to find the materials we need to make our products. If the conflict between Russia and Ukraine continues for a long period of time, or if other countries become further involved in the conflict, we could face significant adverse effects to our business and financial condition. The Company is not able to fully quantify the impact that these factors will have on the Company’s financial results during 2023 and beyond.

Note 2 – Summary of Significant Accounting Policies

Principles of consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries as of September 30, 2023, and December 31, 2022. Significant intercompany balances and transactions have been eliminated.

Use of estimates
The condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. Preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable. This applies in particular to useful lives of long-lived assets, reserves for accounts receivable and inventory, valuation allowance for deferred tax assets, fair values assigned to intangible assets acquired, and impairment of long-lived assets. Actual results could differ significantly from our estimates. To the extent that there are material differences between these estimates and actual results, the Company’s future financial statement presentation, financial condition, results of operations and cash flows will be affected.

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. The following table summarize the effects of the reclassifications on each financial statement line item for the periods indicated.








10

Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2022

Three months ended 9/30/22Nine months ended 9/30/22
Previously FiledEffect of ReclassificationCurrent period presentationPreviously FiledEffect of ReclassificationCurrent period presentation
Cost of revenue21,218,317 676,442 21,894,759 60,283,597 1,993,591 62,277,188 
Gross Profit6,268,098 (676,442)5,591,656 18,066,098 (1,993,591)16,072,507 
General and administrative expenses10,186,857 (602,822)9,584,035 28,604,937 (1,956,614)26,648,323 
Research and development88,960 (62,358)26,602 675,725 31,556 707,281 
Total operating expenses10,160,117 (665,180)9,494,937 23,342,512 (1,925,058)21,417,454 
Loss from operations(3,892,019)(11,262)(3,903,281)(5,276,414)(68,533)(5,344,947)
Interest expense(1,055,687)4,448 (1,051,239)(2,627,122)(9,833)(2,636,955)
Other income (expense)(12,940)6,814 (6,126)278,439 78,366 356,805 
Total other income (expenses)(1,068,627)11,262 (1,057,365)(2,348,683)68,533 (2,280,150)
Net income (loss)$(4,764,370)$ $(4,764,370)$(7,224,124)$ $(7,224,124)

Cash
Cash and cash equivalents consist of cash and short-term investments with original maturities of less than 90 days. As of September 30, 2023, and December 31, 2022, the Company had no cash equivalents.

The Company places its cash with credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limit. As of September 30, 2023 and December 31, 2022, deposits in excess of FDIC limits were $2.3 million and $2.0 million, respectively.

Major Customers & Vendors
The Company had one customer within A4 Technology - RCA segment that made up 10% of total Company accounts receivable as of September 30, 2023. The Company had no customers that made up over 10% of total Company accounts receivable as of December 31, 2022.

For the nine months ended September 30, 2023, the Company had no customers that made up over 10% of total Company revenues. For the nine months ended September 30, 2022, the Company had one customer within the A4 Technology - RCA segment that made up 12% of total Company revenues.

For the nine months ended September 30, 2023 and 2022, the Company earned 10% and 11%, respectively, of total Company revenues from prime contractors.

For the nine months ended September 30, 2023, the Company had no vendors that made up over 10% of total Company purchases. For the nine months ended September 30, 2022, the Company had one vendor within the A4 Technology - RCA segment that made up 14% of total Company purchases.

Inventory
Inventory for all subsidiaries is valued at weighted average cost. Management compares the cost of inventory with its net realizable value and an allowance is made to write down inventory to net realizable value, if lower. Inventory is segregated into three areas, raw materials, work-in-process and finished goods. Inventory at September 30, 2023, and December 31, 2022, consisted of:

September 30, 2023December 31, 2022
Raw materials$9,419,043 $9,116,824 
Work in process2,657,123 3,165,876 
Finished goods10,158,312 12,975,669 
Inventory$22,234,478 $25,258,369 

Goodwill
In financial reporting, goodwill is not amortized, but is tested for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Events that result in an impairment review include
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significant changes in the business climate, declines in our operating results, or an expectation that the carrying amount may not be recoverable. We assess potential impairment by considering present economic conditions as well as future expectations. All assessments of goodwill impairment are conducted at the individual reporting unit level. As of September 30, 2023, the reporting units with goodwill were: TDI and RCA. As of December 31, 2022, the reporting units with goodwill were: QCA-W, MSM, Alt Labs, TDI, IDT, Elecjet Corporation ("Elecjet"), and RCA. See Note 3 - Goodwill and Intangible Assets for additional details.

Impairment of Long-Lived Assets
The Company accounts for long-lived assets in accordance with the provisions of ASC Topic 360, Accounting for the Impairment of Long-Lived Assets. This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when the estimated future cash flows from the use of the asset is less than the carrying amount of that asset. See Note 3 - Goodwill and Intangible Assets for additional details.

Fair value measurements
Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

We apply the provisions of fair value measurement to various nonrecurring measurements for our financial and nonfinancial assets and liabilities. The Company's financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, notes payable and lines of credit. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

We calculate the estimated fair value of a reporting unit using a combination of the income and market approaches. For the income approach, we use DCF models developed in connection with our third-party valuation specialists that include the following assumptions, among others: projections of revenues, expenses, and related cash flows based on assumed long-term growth rates; and estimated discount rates. For the market approach, we use analyses based primarily on market comparables. We base these assumptions on historical data and experience, industry projections, and general economic conditions.

The carrying value of long-term debt approximates fair value since the related rates of interest approximate current market rates. As of September 30, 2023, and December 31, 2022, the Company had no financial assets or liabilities that were required to be fair valued on a recurring basis as all of our financial assets and liabilities were Level 1.

Research and Development
The Company focuses on quality control and development of new products and the improvement of existing products. All costs related to research and development activities are expensed as incurred. During the nine months ended September 30, 2023 and 2022, research and development costs totaled $3.1 million and $0.7 million, respectively.

Loss per share
The Company presents both basic and diluted net loss per share on the face of the condensed consolidated statements of operations. Basic net loss per share is computed by dividing net loss attributable to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted per share calculations give effect to all potentially dilutive shares of common stock outstanding during the period, including stock options and warrants, using the treasury-stock method. If antidilutive, the effect of potentially dilutive shares of common stock is ignored. The amount of
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anti-dilutive shares related to stock options and warrants as of September 30, 2023 and 2022 was 2,878,496 and 2,725,270. respectively. The following table illustrates the computation of basic and diluted earnings per share (“EPS”) inclusive of all classes of common stock as the only difference between the classes of common stock are related to the voting rights for the Three and nine months ended September 30, 2023 and 2022:

For the Three Months Ended September 30, 2023For the Three Months Ended September 30, 2022
Net LossSharesPer Share AmountNet LossSharesPer Share Amount
Basic EPS
Net loss attributable to common shareholders$(40,867,608)27,409,203 $(1.49)$(4,764,370)24,721,070 $(0.19)
Total$(40,867,608)$27,409,203 $(1.49)$(4,764,370)$24,721,070 $(0.19)
For the Nine Months Ended September 30, 2023
For the Nine Months Ended September 30, 2022
Net LossSharesPer Share AmountNet LossSharesPer Share Amount
Basic EPS
Net loss attributable to common shareholders$(51,038,858)25,666,740 $(1.99)$(7,224,124)23,472,306 $(0.31)
Total$(51,038,858)25,666,740 $(1.99)$(7,224,124)23,472,306 $(0.31)

Revenue Recognition
The Company recognizes revenue under ASC Topic 606, Revenue from Contracts with Customers ("Topic 606"). The following is a summary of the revenue recognition policy for each of the Company’s subsidiaries.

Revenue is recognized under Topic 606, at a point in time and over a period of time, in a manner that reasonably reflects the delivery of its services and products to customers in return for expected consideration and includes the following elements:
executed contract with the Company's customers that it believes are legally enforceable;
identification of performance obligations in the respective contract;
determination of the transaction price for each performance obligation in the respective contract;
allocation of the transaction price to each performance obligation; and
recognition of revenue only when the Company satisfies each performance obligation.
QCA and Alt Labs
QCA (Circuit boards and cables) and Alt Labs (Supplements) are contract manufacturers and recognize revenue when the products have been built and control has been transferred to the customer. If a deposit for product or service is received prior to completion, the payment is recorded as deferred revenue until such point the product or services meets our revenue recognition policy. Management assesses the materiality and likelihood of warranty work and returns, and records reserves as needed, and have determined that the warranty and returns would be immaterial for the periods presented.
Elecjet
Elecjet is a manufacturer of electric components, and a research and development company for battery technology and recognizes revenue when the products have been shipped to the customer. If a deposit for a product or service is received prior to completion, the payment is recorded as deferred revenue until such point the product or services meets our revenue recognition policy. Management assesses the materiality and likelihood of warranty work and returns, and records reserves as needed, and have determined that the warranty and returns would be immaterial for the periods presented.
Identified Technologies
Identified Technologies provides 3D mapping drone software and data for industrial job sites and recognizes revenue when the service has been provided to the customer. If a deposit for a product or service is received prior to completion, the payment is recorded as deferred revenue until such point the product or services meets our revenue recognition policy.
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Management assesses the materiality and likelihood of warranty work and returns, and records reserves as needed, and have determined that the warranty and returns would be immaterial for the periods presented.
Direct Tech Sales (“RCA”)
RCA is engaged in the design, manufacture and wholesale distribution of electronics such as televisions, mounting solutions, projectors and screens, audio equipment, digital signage, mobile audio and video systems, and all wire and connecting products throughout the United States of America. RCA recognizes revenue when the products have been shipped to the customer which is also when title transfers. If a deposit for a product or service is received prior to completion, the payment is recorded as deferred revenue until such point the product or services meets our revenue recognition policy. Management assesses the materiality and likelihood of warranty work and returns, and records reserves as needed, and have determined that the warranty and returns would be immaterial for the periods presented.
MSM, Excel and TDI
For our construction contracts, revenue is generally recognized over time as our performance creates or enhances an asset that the customer controls as it is created or enhanced. Our fixed price construction projects generally use a cost-to-cost input method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. For certain of our revenue streams, that are performed under time and materials contracts, our progress towards complete satisfaction of such performance obligations is measured using an output method as the customer receives and consumes the benefits of our performance completed to date. Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation indicate a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident.
Contract Assets and Contract Liabilities
The timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets include unbilled amounts from our construction projects when revenues recognized under the cost-to-cost measure of progress exceed the amounts invoiced to our customers, as the amounts cannot be billed under the terms of our contracts. Such amounts are recoverable from our customers based upon various measures of performance, including achievement of certain milestones, completion of specified units or completion of a contract. In addition, many of our time and materials arrangements, are billed pursuant to contract terms that are standard within the industry, resulting in contract assets being recorded, as revenue is recognized in advance of billings. Our contract assets do not include capitalized costs to obtain and fulfill a contract. Contract assets are generally classified as current within the consolidated balance sheets.
Contract liabilities from our construction contracts arise when amounts invoiced to our customers exceed revenues recognized under the cost-to-cost measure of progress. Contract liabilities additionally include advanced payments from our customers on certain contracts. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation.

The following tables present our revenues disaggregated by type for the three months ended September 30, 2023 and 2022:

Three Months Ended September 30, 2023
Construction ServicesManufacturingDefenseTechnologiesAerospaceTotal
Sale of goods$ $10,767,541 $ $8,062,587 $ $18,830,128 
Sale of services4,305,614  2,074,058  391,004 6,770,676 
Total revenues$4,305,614 $10,767,541 $2,074,058 $8,062,587 $391,004 $25,600,804 

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Three Months Ended September 30, 2022
Construction ServicesManufacturingDefenseTechnologiesAerospaceTotal
Sale of goods$ $7,354,658 $ $11,581,471 $ $18,936,129 
Sale of services5,097,834  3,098,735  353,717 8,550,286 
Total revenues$5,097,834 $7,354,658 $3,098,735 $11,581,471 $353,717 $27,486,415 

The following tables present our revenues disaggregated by type for the nine months ended September 30, 2023 and 2022:

Nine Months Ended September 30, 2023
Construction ServicesManufacturingDefenseTechnologiesAerospaceTotal
Sale of goods$ $32,974,478 $ $24,278,970 $ $57,253,448 
Sale of services12,112,504  7,457,508  1,161,083 20,731,095 
Total revenues$12,112,504 $32,974,478 $7,457,508 $24,278,970 $1,161,083 $77,984,543 

Nine Months Ended September 30, 2022
Construction ServicesManufacturingDefenseTechnologiesAerospaceTotal
Sale of goods$ $23,533,228 $ $30,631,117 $ $54,164,345 
Sale of services14,823,297  8,258,923  1,103,130 24,185,350 
Total revenues$14,823,297 $23,533,228 $8,258,923 $30,631,117 $1,103,130 $78,349,695 

Note 3 - Goodwill and Intangible Assets

During the third quarter of 2023, the Company considered the sustained decrease in the Company’s publicly quoted share price and market capitalization, adverse impacts from macroeconomic conditions such as inflationary pressures and capital markets accessibility, the war in Ukraine and the war in the Middle East, and unfavorable short-term changes in the investment and operating plans of our primary customers; and as a result of these events concluded that a triggering event occurred which required the Company to perform an interim quantitative impairment test as of September 30, 2023. This assessment involved comparing the estimated fair value of each of its reporting units to the reporting unit’s carrying value, inclusive of the goodwill balance allocated to the reporting unit. Based upon the results of the impairment test, the Company concluded that the carrying value of certain reporting units exceeded their estimated fair value, resulting in a goodwill and long-lived intangible assets impairment charge. This impairment charge will not impact the Company’s cash flow.

2023 Year-to-Date Goodwill Impairment Testing
Due to the triggering event noted above, the Company performed an interim quantitative impairment test as of September 30, 2023. We calculate the estimated fair value of a reporting unit using a combination of the income and market approaches. Under the income approach, we utilized the discounted cash flow models developed in connection with our third-party valuation specialists that include the following assumptions, among others: projections of revenues, expenses, and related cash flows based on assumed long-term growth rates; and estimated discount rates. For the market approach, we use analyses based primarily on market comparables. We base these assumptions on historical data and experience, industry projections, and general economic conditions.

As a result of our interim impairment test that occurred as of September 30, 2023, we recognized a non-cash Goodwill impairment losses of $14.9 million within operating expenses during the third quarter of 2023. The impairment was primarily due to a decline in market capitalization coupled with sustained expectations of declining revenue growth and decreased margins in future years. After these impairments, the aggregate carrying amount of Goodwill was $7.8 million.

Additional Goodwill Impairment Considerations
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates
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include estimated future annual net cash flows, income tax considerations, discount rates, growth rates, royalty rates, contributory asset charges, and other market factors. If current expectations of future growth rates and margins are not met, if market factors outside of our control, such as discount rates, market capitalization, income tax rates, foreign currency exchange rates, or inflation, change, or if management’s expectations or plans otherwise change, including updates to our long-term operating plans, then more of our reporting units might become impaired in the future. Additionally, any decisions to divest certain non-strategic assets has led, and could in the future lead, to Goodwill impairments.

The reporting units impaired in 2023 were written down to their respective fair values resulting in zero excess fair value over carrying amount as of the applicable impairment test dates. TDI and RCA each have 10% or less excess fair value over carrying amount as of the 2023 interim impairment test and therefore have a heightened risk of future impairments if any assumptions, estimates, or market factors change in the future. See Note 8 - Segment Reporting for additional details on the reporting segments that incurred goodwill impairment.

Changes in goodwill as of September 30, 2023 were as follows:
2023
Balance as of December 31, 2022$22,680,084 
Impairment of goodwill(14,897,570)
Balance as of September 30, 2023$7,782,514 

Impairment of Long-Lived Assets
As a result of our 2023 interim impairment test that occurred as of September 30, 2023, the Company determined that the carrying value of certain intangible assets had exceeded its undiscounted cash flows and, as a result, recorded a non-cash intangible asset impairment charge of $18.4 million in the consolidated statements of operations within operating expenses during the three and nine months ended September 30, 2023. Amortization expense for intangible assets was $0.8 million for the three months and $2.4 million for the nine months ended September 30, 2023 and $0.8 million for the three months and $2.3 million for the nine months ended September 30, 2022.

Changes in the carrying amount of intangible assets were as follows:

SoftwareNon-competeCustomer listsPatents, trademarks, and licensesProprietary technologyIntangible assets, Net
Balance as of December 31, 2022$51,390 $947,766 $11,299,860 $6,165,150 $17,818,443 $36,282,609 
Impairment of intangible assets  (623,179)(5,302,432)(12,482,232)(18,407,843)
Amortization expense(51,390)(151,000)(767,058)(432,830)(993,878)(2,396,156)
Balance as of September 30, 2023$ $796,766 $9,909,623 $429,888 $4,342,333 $15,478,610 


Note 4 – Leases

The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in our consolidated balance sheets. Finance leases are included in property and equipment and finance lease liabilities on the consolidated balance sheets.When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company discounts lease payments based on an estimate of its incremental borrowing rate.

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As of September 30, 2023, the future minimum finance and operating lease payments were as follows:

Twelve Months Ending September 30,
Finance
Leases
Operating
Leases
2024$1,958,956 $2,427,879 
20251,934,916 2,132,342 
20261,871,566 1,795,302 
20271,911,880 1,832,680 
20281,944,907 1,585,379 
Thereafter13,391,240 12,063,124 
Total payments23,013,465 21,836,706 
Less: imputed interest(8,192,025)(6,231,797)
Total obligation14,821,440 15,604,909 
Less: current portion(800,610)(1,555,872)
Non-current lease obligations$