pegy-20220630x10q

‎ 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 June 30, 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 August 15, 2022	7,435,586



PINEAPPLE ENERGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

ASSETS
	June 30		December 31
	2022		2021
CURRENT ASSETS:
Cash and cash equivalents	$	3,495,235	$	18,966
Restricted cash and cash equivalents		11,554,406		—
Investments		1,462,747		—
Trade accounts receivable, less allowance for
doubtful accounts of $64,000 and $0, respectively		3,440,173		—
Inventories, net		1,266,730		—
Prepaid income taxes		11,071		—
Other current assets		1,032,418		—
TOTAL CURRENT ASSETS		22,262,780		18,966
PROPERTY, PLANT AND EQUIPMENT, net		274,149		—
OTHER ASSETS:
Investments		1,600,913		—
Goodwill		16,602,399		—
Operating lease right of use asset		95,906		—
Intangible assets, net		17,752,586		2,780,270
Other assets, net		44,843		—
TOTAL OTHER ASSETS		36,096,647		2,780,270
TOTAL ASSETS	$	58,633,576	$	2,799,236
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	2,321,143	$	2,233,371
Accrued compensation and benefits		497,784		307,828
Operating lease liability		69,793		—
Other accrued liabilities		61,817		—
Working capital note payable		—		350,000
Customer deposits		1,242,801		—
Deferred revenue		709,120		—
Contingent value rights		8,745,628		—
TOTAL CURRENT LIABILITIES		13,648,086		2,891,199
LONG-TERM LIABILITIES:
Loan payable and related interest		1,106,013		6,194,931
Related party payables		—		2,350,000
Operating lease liability		27,942		—
Deferred revenue		360,404		—
Earnout consideration		13,000		—
Contingent value rights		10,746,162		—
TOTAL LONG-TERM LIABILITIES		12,253,521		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		(9,177,876)		(8,736,894)
Accumulated other comprehensive loss		(32,798)		—
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		32,731,969		(8,636,894)



PINEAPPLE ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
Sales	$	5,890,636	$	—	$	6,209,436	$	—
Cost of sales		4,614,374		—		4,838,042		—
Gross profit		1,276,262		—		1,371,394		—
Operating expenses:
Selling, general and administrative expenses		3,233,548		225,030		3,530,820		456,257
Amortization expense		1,026,220		357,323		1,383,683		714,647
Transaction costs		213,396		1,263,057		1,181,901		1,431,502
Total operating expenses		4,473,164		1,845,410		6,096,404		2,602,406
Operating loss		(3,196,902)		(1,845,410)		(4,725,010)		(2,602,406)
Other income (expense):
Investment and other income		103,903		—		98,759		—
Gain on sale of assets		1,214,560		—		1,214,560		—
Fair value remeasurement of earnout consideration		4,671,000		—		4,671,000		—
Fair value remeasurement of contingent value rights		(1,214,560)		—		(1,214,560)		—
Interest and other expense		(135,349)		(417,857)		(485,731)		(729,270)
Other income (expense), net		4,639,554		(417,857)		4,284,028		(729,270)
Net income (loss) before income taxes		1,442,652		(2,263,267)		(440,982)		(3,331,676)
Income tax expense		—		—		—		—
Net income (loss)		1,442,652		(2,263,267)		(440,982)		(3,331,676)

Other comprehensive loss, net of tax:
Unrealized loss on available-for-sale securities		(15,731)		—		(32,798)		—
Total other comprehensive loss		(15,731)		—		(32,798)		—
Comprehensive income (loss)	$	1,426,921	$	(2,263,267)	$	(473,780)	$	(3,331,676)


Basic net income (loss) per share:	$	0.19	$	(0.74)	$	(0.08)	$	(1.08)
Diluted net income (loss) per share:	$	0.15	$	(0.74)	$	(0.08)	$	(1.08)

Weighted Average Basic Shares Outstanding		7,435,586		3,074,998		5,345,137		3,074,998
Weighted Average Dilutive Shares Outstanding		9,788,522		3,074,998		5,345,137		3,074,998

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

‎


PINEAPPLE ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
For the Six Months Ended June 30, 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	—		—	—		—		—		(440,982)		—		(440,982)
Issuance of common stock for
professional services	—		—	12,499		625		(625)		—		—		—
Issuance of common stock for
conversion of related party payables	—		—	293,750		14,687		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	—		—	—		—		—		—		(32,798)		(32,798)
BALANCE AT JUNE 30, 2022	32,000	$	32,000	7,435,586	$	371,779	$	41,538,864	$	(9,177,876)	$	(32,798)	$	32,731,969

For the Three Months Ended June 30, 2022

			Page No.
Part I.	Financial Information

	Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets		2

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)		4

	Condensed Consolidated Statements of Changes in Stockholders’ Equity		5

	Condensed Consolidated Statements of Cash Flows		7

	Notes to Condensed Consolidated Financial Statements		8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33

	Item 4.	Controls and Procedures	33

Part II.	Other Information		34

SIGNATURES CERTIFICATIONS			35

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	58,633,576	$	2,799,236

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