pegy-20230331x10q

‎ 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, 2023


	☐	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 12, 2023	9,948,836



PINEAPPLE ENERGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

ASSETS
	March 31		December 31
	2023		2022
CURRENT ASSETS:
Cash and cash equivalents	$	1,920,414	$	2,187,540
Restricted cash and cash equivalents		3,672,510		3,068,938
Investments		2,018,057		2,666,766
Trade accounts receivable, less allowance for
credit losses of $112,581 and $108,636, respectively		6,118,196		5,564,532
Inventories, net		5,679,961		6,054,493
Employee retention credit		—		1,584,541
Related party receivables		76,847		116,710
Prepaid expenses		1,663,536		2,152,058
Costs and estimated earnings in excess of billings		507,564		777,485
Other current assets		634,095		634,362
Current assets held for sale		1,301,823		1,154,099
TOTAL CURRENT ASSETS		23,593,003		25,961,524
PROPERTY, PLANT AND EQUIPMENT, net		1,473,464		1,190,932
OTHER ASSETS:
Goodwill		20,545,850		20,545,850
Operating lease right of use asset		4,672,439		4,166,838
Intangible assets, net		19,280,111		20,546,810
Other assets, net		12,000		12,000
Non-current assets held for sale		2,264,810		2,271,533
TOTAL OTHER ASSETS		46,775,210		47,543,031
TOTAL ASSETS	$	71,841,677	$	74,695,487
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	7,748,143	$	7,594,181
Accrued compensation and benefits		737,793		859,774
Operating lease liability		322,378		220,763
Other accrued liabilities		1,328,544		1,238,777
Related party payables		549,720		2,181,761
Income taxes payable		1,318		1,650
Refundable customer deposits		2,752,156		4,285,129
Billings in excess of costs and estimated earnings		3,104,435		2,705,409
Current portion of loans payable		371,264		346,290
Current portion of loans payable - related party		5,413,170		5,339,265
Current liabilities held for sale		1,069,199		1,161,159
TOTAL CURRENT LIABILITIES		23,398,120		25,934,158
LONG-TERM LIABILITIES:
Loans payable and related interest		3,444,316		3,138,194
Loans payable and related interest - related party		4,731,778		4,635,914
Operating lease liability		4,379,432		3,961,340
Earnout consideration		2,975,000		2,150,000
Contingent value rights		7,652,714		7,402,714
Long term liabilities held for sale		262,455		250,875
TOTAL LONG-TERM LIABILITIES		23,445,695		21,539,037
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY



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


	Three Months Ended March 31
	2023		2022
Sales	$	22,065,424	$	231,868
Cost of sales		14,059,109		166,160
Gross profit		8,006,315		65,708
Operating expenses:
Selling, general and administrative expenses		8,062,123		273,750
Amortization expense		1,266,698		357,463
Transaction costs		2,020		968,505
Fair value remeasurement of SUNation earnout consideration		825,000		—
Total operating expenses		10,155,841		1,599,718
Operating loss		(2,149,526)		(1,534,010)
Other income (expense):
Investment and other income (expense)		19,533		(5,144)
Gain on sale of assets		244,271		—
Fair value remeasurement of contingent value rights		(250,000)		—
Interest and other expense		(458,218)		(350,382)
Other expense, net		(444,414)		(355,526)
Net loss before income taxes		(2,593,940)		(1,889,536)
Income tax expense		5,732		—
Net loss from continuing operations		(2,599,672)		(1,889,536)
Net income from discontinued operations, net of tax		44,683		5,902
Net loss		(2,554,989)		(1,883,634)

Other comprehensive gain (loss), net of tax:
Unrealized gain (loss) on available-for-sale securities		24,405		(17,067)
Total other comprehensive gain (loss)		24,405		(17,067)
Comprehensive loss	$	(2,530,584)	$	(1,900,701)


Basic net loss per share:
Continuing operations	$	(0.26)	$	(0.58)
Discontinued operations		—		—
	$	(0.26)	$	(0.58)

Diluted net loss per share:
Continuing operations	$	(0.26)		(0.58)
Discontinued operations		—		—
	$	(0.26)	$	(0.58)

Weighted Average Basic Shares Outstanding		9,919,650		3,231,461
Weighted Average Dilutive Shares Outstanding		9,919,650		3,231,461

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 Three Months Ended March 31, 2023

											Accumulated
	Series A						Additional				Other
	Preferred Stock			Common Stock			Paid-in		Accumulated		Comprehensive
	Shares	Amount		Shares	Amount		Capital		Deficit		Income (Loss)		Total
BALANCE AT DECEMBER 31, 2022	28,000	$	28,000	9,915,586	$	495,779	$	45,798,069	$	(19,089,134)	$	(10,422)	$	27,222,292
Net loss	—		—	—		—		—		(2,554,989)		—		(2,554,989)
Issuance of common stock under
Equity Incentive Plan	—		—	37,500		1,875		(1,875)		—		—		—
Share based compensation	—		—	—		—		312,445		—		—		312,445
Other share retirements	—		—	(4,250)		(212)		(19,698)		13,619		—		(6,291)
Other comprehensive income	—		—	—		—		—		—		24,405		24,405
BALANCE AT MARCH 31, 2023	28,000	$	28,000	9,948,836	$	497,442	$	46,088,941	$	(21,630,504)	$	13,983	$	24,997,862


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

			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		8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36

	Item 4.	Controls and Procedures	36

Part II.	Other Information		37

SIGNATURES CERTIFICATIONS			38

Convertible preferred stock, par value $1.00 per share; 3,000,000 shares authorized; 28,000 shares issued and outstanding		28,000		28,000
Common stock, par value $0.05 per share; 75,000,000 shares authorized;
9,948,836 and 9,915,586 shares issued and outstanding, respectively		497,442		495,779
Additional paid-in capital		46,088,941		45,798,069
Accumulated deficit		(21,630,504)		(19,089,134)
Accumulated other comprehensive income (loss)		13,983		(10,422)
TOTAL STOCKHOLDERS' EQUITY		24,997,862		27,222,292
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	71,841,677	$	74,695,487

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